Averch-Johnson effect

Updated: Aug 20, 2021

The observation that whenever the profit to capital ratio of a company is regulated it has an incentive to over-invest in capital. This results in an inefficiently high level of capital accumulation.

Reference: Oxford Press Dictonary of Economics, 5th edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.