James d. Gwartney

Smoot-Hawley tariff: Legislation passed in the United States in June 1930 that increased
tariff rates by approximately 50 percent. Other countries retaliated and international trade fell
sharply. The legislation was a major contributing factor to the Great Depression. 
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socialism: The set of beliefs that states that all people are equal and should share equally in a
country’s money, or the political systems based on these beliefs. 
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special-interest effect: The bias of the political process toward adoption of programs that
provide substantial individual benefits to well-organized interest groups at the expense of small
individual costs imposed on the bulk of voters. There is a tendency for such programs to be
adopted even when they are inefficient. 
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special-interest issue: An issue that generates substantial individual benefits to a small
organized minority while imposing a small individual cost on many other voters. 
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specialization: Specialization is a method of production whereby an entity focuses on the
production of a limited scope of goods to gain a greater degree of efficiency. 
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stagnation: A situation in which the economy stays the same and does not grow and develop.
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Standard & Poor’s (S&P) 500 Index: A basket of five hundred stocks that are selected
because they are thought to be collectively representative of the stock market as a whole. Over
70 percent of all U.S. stock value is contained in the S&P 500. 
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stock: Ownership shares of a corporation. Corporations raise funds by issuing stock ownership
shares, which entitle the owners to a proportional share of the firm’s profits. The stock owners
are not liable for the debts of the corporation beyond their initial investment. However, there is
no assurance that the owners will receive either their initial investment or any return in the
future. 
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