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In Fama's influential 1970 review paper, he categorized empirical tests of efficiency into "weak-form", "semi-strong-form", and "strong-form" tests. [2] These categories of tests refer to the information set used in the statement "prices reflect all available information." Weak-form tests study the information contained in historical prices.
Unlike weak sustainability, strong sustainability puts the emphasis on ecological scale over economic gains. This implies that nature has a right to exist and that it has been borrowed and should be passed on from one generation to the next still intact in its original form.
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
Therefore, revealed preference is a way to infer the preferences of individuals given the observed choices. It contrasts with attempts to directly measure preferences or utility, for example through stated preferences. Taking economics to be an empirical subject, there is the issue that one cannot observe preferences.
This definition defines monotonic increasing preferences. Monotonic decreasing preferences can often be defined to be compatible with this definition. For instance, an agent's preferences for pollution may be monotonic decreasing (less pollution is better). In this case, the agent's preferences for lack of pollution are monotonic increasing.
Convex preferences relate to averages between two points on an indifference curve. It comes in two forms, weak and strong. In its weak form, convex preferences state that if , then the average of A and B is at least as good as A. In contrast, the average of A and B would be preferred in its strong form.
Formally, a strong Pareto improvement is defined as a situation in which all agents are strictly better-off (in contrast to just "Pareto improvement", which requires that one agent is strictly better-off and the other agents are at least as good). A situation is weak Pareto-efficient if it has no strong Pareto improvements.
One survey of German economists found that ecological and environmental economics are different schools of economic thought, with ecological economists emphasizing strong sustainability and rejecting the proposition that physical (human-made) capital can substitute for natural capital (see the section on weak versus strong sustainability below).