distortion
dih-STOR-shun
/dɪˈstɔːrʃən/
A change in the natural economic outcome caused by factors like taxes, subsidies, price controls, or monopolies.
Implies that price signals or incentives have been bent away from their competitive equilibrium state.
The story behind the word. From Latin 'distortio', from 'distorquere' meaning 'to twist apart'. It moved from describing physical deformation to optical image warping, and finally in the 20th century to describe the twisting of market pricing mechanics.
Word relationships
- perversion: Perversion implies moral corruption, while distortion in economics specifically means twisting market prices or signals.
- equilibrium: Equilibrium represents the natural, balanced state of supply and demand without artificial bending.
Commonly confused with
- inefficiency: Distortion is the cause (warped incentives or prices); inefficiency is the ultimate wasteful result.
Word family
- distort (verb): To twist out of natural shape or price equilibrium.
- distorted (adjective): Warped away from true competitive values.
Collocations
- market distortion
- price distortion
- distort incentives
Example sentences
- "Heavy agricultural subsidies cause price distortion, leading farmers to overproduce crops." Agricultural subsidies debate
- "Artificially low interest rates created market distortion in the housing market." Financial regulation
Memory hook
DIS-TORQUERE = TWIST away from true market signals. Twisted market price.
When not to use
Do not use to describe normal price changes caused by natural shifts in supply and consumer demand.
Fun facts
- Rent control policies are a textbook example of price distortion: setting a price ceiling prevents prices from reflecting true scarcity.
Related words
Explore more words
disinformation, slant, disproportionate, misinformation, disruption, deceitful
Also appears in
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