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Wednesday, May 15, 2024

Latin

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Latin

Latin
Latin inscription on a stone inside the Colosseum in Rome, Italy
Native to
Ethnicity
EraAs a native language, from the 7th century BC to c. AD 700
Early form
Latin alphabet (Latin script)
Official status
Official language in
 Vatican City
Regulated byPontifical Academy for Latin
Language codes
ISO 639-1la
ISO 639-2lat
ISO 639-3lat
Glottologimpe1234
lati1261
Linguasphere51-AAB-aa, -ab, -ac
Greatest extent of the Roman Empire under Emperor Trajan (c. 117 AD) and the area governed by Latin speakers. Many languages other than Latin were spoken within the empire.
This article contains IPA phonetic symbols. Without proper rendering support, you may see question marks, boxes, or other symbols instead of Unicode characters. For an introductory guide on IPA symbols, see Help:IPA.

Latin (lingua Latina, Latin: [ˈlɪŋɡʷa ɫaˈtiːna], or Latinum, Latin: [ɫaˈtiːnʊ̃]) is a classical language belonging to the Italic branch of the Indo-European languages. Considered a dead language, Latin was originally spoken in Latium (now known as Lazio), the lower Tiber area around Rome. Through the expansion of the Roman Republic it became the dominant language in the Italian Peninsula and subsequently throughout the Roman Empire. Even after the fall of Western Rome, Latin remained the common language of international communication, science, scholarship and academia in Europe until well into the early 19th century, when regional vernaculars supplanted it in common academic and political usage—including its own descendants, the Romance languages. For most of the time it was used, it would be considered a dead language in the modern linguistic definition; that is, it lacked native speakers, despite being used extensively and actively.

Latin grammar is highly fusional, with classes of inflections for case, number, person, gender, tense, mood, voice, and aspect. The Latin alphabet is directly derived from the Etruscan and Greek alphabets.

By the late Roman Republic (75 BC), Old Latin had evolved into standardized Classical Latin. Vulgar Latin was the colloquial register with less prestigious variations attested in inscriptions and some literary works such as those of the comic playwrights Plautus and Terence and the author Petronius. Late Latin is the literary language from the 3rd century AD onward, and Vulgar Latin's various regional dialects had developed by the 6th to 9th centuries into the ancestors of the modern Romance languages.

In Latin's usage beyond the early medieval period, it lacked native speakers. Medieval Latin was used across Western and Catholic Europe during the Middle Ages as a working and literary language from the 9th century to the Renaissance, which then developed a classicizing form, called Renaissance Latin. This was the basis for Neo-Latin which evolved during the early modern period. In these periods Latin was used productively and generally taught to be written and spoken, at least until the late seventeenth century, when spoken skills began to erode. It then became increasingly taught only to be read.

Latin remains the official language of the Holy See and the Roman Rite of the Catholic Church at the Vatican City. The church continues to adapt concepts from modern languages to Ecclesiastical Latin of the Latin language. Contemporary Latin is more often studied to be read rather than spoken or actively used.

Latin has greatly influenced the English language, along with a large amount of others, and historically contributed many words to the English lexicon, particularly after the Christianization of the Anglo-Saxons and the Norman Conquest. Latin and Ancient Greek roots are heavily used in English vocabulary in theology, the sciences, medicine, and law.

History

The linguistic landscape of Central Italy at the beginning of Roman expansion

A number of phases of the language have been recognized, each distinguished by subtle differences in vocabulary, usage, spelling, and syntax. There are no hard and fast rules of classification; different scholars emphasize different features. As a result, the list has variants, as well as alternative names.

In addition to the historical phases, Ecclesiastical Latin refers to the styles used by the writers of the Roman Catholic Church from late antiquity onward, as well as by Protestant scholars.

After the Western Roman Empire fell in 476 and Germanic kingdoms took its place, the Germanic people adopted Latin as a language more suitable for legal and other, more formal uses.

Old Latin

The Lapis Niger, probably the oldest extant Latin inscription, from Rome, c. 600 BC during the semi-legendary Roman Kingdom

The earliest known form of Latin is Old Latin, also called Archaic or Early Latin, which was spoken from the Roman Kingdom, traditionally founded in 753 BC, through the later part of the Roman Republic, up to 75 BC, i.e. before the age of Classical Latin. It is attested both in inscriptions and in some of the earliest extant Latin literary works, such as the comedies of Plautus and Terence. The Latin alphabet was devised from the Etruscan alphabet. The writing later changed from what was initially either a right-to-left or a boustrophedon script to what ultimately became a strictly left-to-right script.

Classical Latin

During the late republic and into the first years of the empire, from about 75 BC to 200 AD, a new Classical Latin arose, a conscious creation of the orators, poets, historians and other literate men, who wrote the great works of classical literature, which were taught in grammar and rhetoric schools. Today's instructional grammars trace their roots to such schools, which served as a sort of informal language academy dedicated to maintaining and perpetuating educated speech.

Vulgar Latin

Philological analysis of Archaic Latin works, such as those of Plautus, which contain fragments of everyday speech, gives evidence of an informal register of the language, Vulgar Latin (termed sermo vulgi, "the speech of the masses", by Cicero). Some linguists, particularly in the nineteenth century, believed this to be a separate language, existing more or less in parallel with the literary or educated Latin, but this is now widely dismissed.

The term 'Vulgar Latin' remains difficult to define, referring both to informal speech at any time within the history of Latin, and the kind of informal Latin that had begun to move away from the written language significantly in the post-Imperial period, that led ultimately to the Romance languages.

During the Classical period, informal language was rarely written, so philologists have been left with only individual words and phrases cited by classical authors, inscriptions such as Curse tablets and those found as graffiti. In the Late Latin period, language changes reflecting spoken (non-classical) norms tend to be found in greater quantities in texts. As it was free to develop on its own, there is no reason to suppose that the speech was uniform either diachronically or geographically. On the contrary, Romanised European populations developed their own dialects of the language, which eventually led to the differentiation of Romance languages.

Late Latin

Late Latin is a kind of written Latin used in the 3rd to 6th centuries. This began to diverge from Classical forms at a faster pace. It is characterised by greater use of prepositions, and word order that is closer to modern Romance languages, for example, while grammatically retaining more or less the same formal rules as Classical Latin.

Ultimately, Latin diverged into a distinct written form, where the commonly spoken form was perceived as a separate language, for instance early French or Italian dialects, that could be transcribed differently. It took some time for these to be viewed as wholly different from Latin however.

Romance languages

While the written form of Latin was increasingly standardized into a fixed form, the spoken forms began to diverge more greatly. Currently, the five most widely spoken Romance languages by number of native speakers are Spanish, Portuguese, French, Italian, and Romanian. Despite dialectal variation, which is found in any widespread language, the languages of Spain, France, Portugal, and Italy have retained a remarkable unity in phonological forms and developments, bolstered by the stabilising influence of their common Christian (Roman Catholic) culture.

It was not until the Muslim conquest of Spain in 711, cutting off communications between the major Romance regions, that the languages began to diverge seriously. The spoken Latin that would later become Romanian diverged somewhat more from the other varieties, as it was largely separated from the unifying influences in the western part of the Empire.

Spoken Latin began to diverge into distinct languages by the 9th century at the latest, when the earliest extant Romance writings begin to appear. They were, throughout the period, confined to everyday speech, as Medieval Latin was used for writing.

It should also be noted, however, that for many Italians using Latin, there was no complete separation between Italian and Latin, even into the beginning of the Renaissance. Petrarch for example saw Latin as a literary version of the spoken language.

Medieval Latin

The Latin Malmesbury Bible from 1407

Medieval Latin is the written Latin in use during that portion of the postclassical period when no corresponding Latin vernacular existed, that is from around 700 to 1500 AD. The spoken language had developed into the various Romance languages; however, in the educated and official world, Latin continued without its natural spoken base. Moreover, this Latin spread into lands that had never spoken Latin, such as the Germanic and Slavic nations. It became useful for international communication between the member states of the Holy Roman Empire and its allies.

Without the institutions of the Roman Empire that had supported its uniformity, Medieval Latin was much freer in its linguistic cohesion: for example, in classical Latin sum and eram are used as auxiliary verbs in the perfect and pluperfect passive, which are compound tenses. Medieval Latin might use fui and fueram instead. Furthermore, the meanings of many words were changed and new words were introduced, often under influence from the vernacular. Identifiable individual styles of classically incorrect Latin prevail.

Renaissance and Neo-Latin

Most 15th-century printed books (incunabula) were in Latin, with the vernacular languages playing only a secondary role.

Renaissance Latin, 1300 to 1500, and the classicised Latin that followed through to the present are often grouped together as Neo-Latin, or New Latin, which have in recent decades become a focus of renewed study, given their importance for the development of European culture, religion and science. The vast majority of written Latin belongs to this period, but its full extent is unknown.

The Renaissance reinforced the position of Latin as a spoken and written language by the scholarship by the Renaissance humanists. Petrarch and others began to change their usage of Latin as they explored the texts of the Classical Latin world. Skills of textual criticism evolved to create much more accurate versions of extant texts through the fifteenth and sixteenth centuries, and some important texts were rediscovered. Comprehensive versions of author's works were published by Isaac Casaubon, Joseph Scaliger and others. Nevertheless, despite the careful work of Petrarch, Politian and others, first the demand for manuscripts, and then the rush to bring works into print, led to the circulation of inaccurate copies for several centuries following.

Neo-Latin literature was extensive and prolific, but less well known or understood today. Works covered poetry, prose stories and early novels, occasional pieces and collections of letters, to name a few. Famous and well regarded writers included Petrarch, Erasmus, Salutati, Celtis, George Buchanan and Thomas More. Non fiction works were long produced in many subjects, including the sciences, law, philosophy, historiography and theology. Famous examples include Isaac Newton's Principia. Latin was also used as a convenient medium for translations of important works first written in a vernacular, such as those of Descartes.

Latin education underwent a process of reform to classicise written and spoken Latin. Schooling remained largely Latin medium until approximately 1700. Until the end of the 17th century, the majority of books and almost all diplomatic documents were written in Latin. Afterwards, most diplomatic documents were written in French (a Romance language) and later native or other languages. Education methods gradually shifted towards written Latin, and eventually concentrating solely on reading skills. The decline of Latin education took several centuries and proceeded much more slowly than the decline in written Latin output.

Contemporary Latin

Despite having no native speakers, Latin is still used for a variety of purposes in the contemporary world.

Religious use

The signs at Wallsend Metro station are in English and Latin, as a tribute to Wallsend's role as one of the outposts of the Roman Empire, as the eastern end of Hadrian's Wall (hence the name) at Segedunum.

The largest organisation that retains Latin in official and quasi-official contexts is the Catholic Church. The Catholic Church required that Mass be carried out in Latin until the Second Vatican Council of 1962–1965, which permitted the use of the vernacular. Latin remains the language of the Roman Rite. The Tridentine Mass (also known as the Extraordinary Form or Traditional Latin Mass) is celebrated in Latin. Although the Mass of Paul VI (also known as the Ordinary Form or the Novus Ordo) is usually celebrated in the local vernacular language, it can be and often is said in Latin, in part or in whole, especially at multilingual gatherings. It is the official language of the Holy See, the primary language of its public journal, the Acta Apostolicae Sedis, and the working language of the Roman Rota. Vatican City is also home to the world's only automatic teller machine that gives instructions in Latin. In the pontifical universities postgraduate courses of Canon law are taught in Latin, and papers are written in the same language.

There are a small number of Latin services held in the Anglican church. These include an annual service in Oxford, delivered with a Latin sermon; a relic from the period when Latin was the normal spoken language of the university.

The polyglot European Union has adopted Latin names in the logos of some of its institutions for the sake of linguistic compromise, an "ecumenical nationalism" common to most of the continent and as a sign of the continent's heritage (such as the EU Council: Consilium).

Use of Latin for mottos

In the Western world, many organizations, governments and schools use Latin for their mottos due to its association with formality, tradition, and the roots of Western culture.

Canada's motto A mari usque ad mare ("from sea to sea") and most provincial mottos are also in Latin. The Canadian Victoria Cross is modelled after the British Victoria Cross which has the inscription "For Valour". Because Canada is officially bilingual, the Canadian medal has replaced the English inscription with the Latin Pro Valore.

Spain's motto Plus ultra, meaning "even further", or figuratively "Further!", is also Latin in origin. It is taken from the personal motto of Charles V, Holy Roman Emperor and King of Spain (as Charles I), and is a reversal of the original phrase Non terrae plus ultra ("No land further beyond", "No further!"). According to legend, this phrase was inscribed as a warning on the Pillars of Hercules, the rocks on both sides of the Strait of Gibraltar and the western end of the known, Mediterranean world. Charles adopted the motto following the discovery of the New World by Columbus, and it also has metaphorical suggestions of taking risks and striving for excellence.

In the United States the unofficial national motto until 1956 was E pluribus unum meaning "Out of many, one". The motto continues to be featured on the Great Seal, it also appears on the flags and seals of both houses of congress and the flags of the states of Michigan, North Dakota, New York, and Wisconsin. The motto's 13 letters symbolically represent the original Thirteen Colonies which revolted from the British Crown. The motto is featured on all presently minted coinage and has been featured in most coinage throughout the nation's history.

Several states of the United States have Latin mottos, such as:

Many military organizations today have Latin mottos, such as:

A law governing body in the Philippines have a Latin motto, such as:

Some colleges and universities have adopted Latin mottos, for example Harvard University's motto is Veritas ("truth"). Veritas was the goddess of truth, a daughter of Saturn, and the mother of Virtue.

Other modern uses

Switzerland has adopted the country's Latin short name Helvetia on coins and stamps, since there is no room to use all of the nation's four official languages. For a similar reason, it adopted the international vehicle and internet code CH, which stands for Confoederatio Helvetica, the country's full Latin name.

Some film and television in ancient settings, such as Sebastiane, The Passion of the Christ and Barbarians (2020 TV series), have been made with dialogue in Latin. Occasionally, Latin dialogue is used because of its association with religion or philosophy, in such film/television series as The Exorcist and Lost ("Jughead"). Subtitles are usually shown for the benefit of those who do not understand Latin. There are also songs written with Latin lyrics. The libretto for the opera-oratorio Oedipus rex by Igor Stravinsky is in Latin.

The continued instruction of Latin is often seen as a highly valuable component of a liberal arts education. Latin is taught at many high schools, especially in Europe and the Americas. It is most common in British public schools and grammar schools, the Italian liceo classico and liceo scientifico, the German Humanistisches Gymnasium and the Dutch gymnasium.

Occasionally, some media outlets, targeting enthusiasts, broadcast in Latin. Notable examples include Radio Bremen in Germany, YLE radio in Finland (the Nuntii Latini broadcast from 1989 until it was shut down in June 2019), and Vatican Radio & Television, all of which broadcast news segments and other material in Latin.

A variety of organisations, as well as informal Latin 'circuli' ('circles'), have been founded in more recent times to support the use of spoken Latin. Moreover, a number of university classics departments have begun incorporating communicative pedagogies in their Latin courses. These include the University of Kentucky, the University of Oxford and also Princeton University.

There are many websites and forums maintained in Latin by enthusiasts. The Latin Wikipedia has more than 130,000 articles.

Urdaneta City's motto Deo servire populo sufficere ("It is enough for the people to serve God") the Latin motto can be read in the old seal of this Philippine city.

Legacy

Italian, French, Portuguese, Spanish, Romanian, Catalan, Romansh and other Romance languages are direct descendants of Latin. There are also many Latin borrowings in English and Albanian, as well as a few in German, Dutch, Norwegian, Danish and Swedish. Latin is still spoken in Vatican City, a city-state situated in Rome that is the seat of the Catholic Church.

Literature

Julius Caesar's Commentarii de Bello Gallico is one of the most famous classical Latin texts of the Golden Age of Latin. The unvarnished, journalistic style of this patrician general has long been taught as a model of the urbane Latin officially spoken and written in the floruit of the Roman Republic.

The works of several hundred ancient authors who wrote in Latin have survived in whole or in part, in substantial works or in fragments to be analyzed in philology. They are in part the subject matter of the field of classics. Their works were published in manuscript form before the invention of printing and are now published in carefully annotated printed editions, such as the Loeb Classical Library, published by Harvard University Press, or the Oxford Classical Texts, published by Oxford University Press.

Latin translations of modern literature such as: The Hobbit, Treasure Island, Robinson Crusoe, Paddington Bear, Winnie the Pooh, The Adventures of Tintin, Asterix, Harry Potter, Le Petit Prince, Max and Moritz, How the Grinch Stole Christmas!, The Cat in the Hat, and a book of fairy tales, "fabulae mirabiles", are intended to garner popular interest in the language. Additional resources include phrasebooks and resources for rendering everyday phrases and concepts into Latin, such as Meissner's Latin Phrasebook.

Inscriptions

Some inscriptions have been published in an internationally agreed, monumental, multivolume series, the Corpus Inscriptionum Latinarum (CIL). Authors and publishers vary, but the format is about the same: volumes detailing inscriptions with a critical apparatus stating the provenance and relevant information. The reading and interpretation of these inscriptions is the subject matter of the field of epigraphy. About 270,000 inscriptions are known.

Influence on present-day languages

The Latin influence in English has been significant at all stages of its insular development. In the Middle Ages, borrowing from Latin occurred from ecclesiastical usage established by Saint Augustine of Canterbury in the 6th century or indirectly after the Norman Conquest, through the Anglo-Norman language. From the 16th to the 18th centuries, English writers cobbled together huge numbers of new words from Latin and Greek words, dubbed "inkhorn terms", as if they had spilled from a pot of ink. Many of these words were used once by the author and then forgotten, but some useful ones survived, such as 'imbibe' and 'extrapolate'. Many of the most common polysyllabic English words are of Latin origin through the medium of Old French. Romance words make respectively 59%, 20% and 14% of English, German and Dutch vocabularies. Those figures can rise dramatically when only non-compound and non-derived words are included.

Range of the Romance languages, the modern descendants of Latin, in Europe.

The influence of Roman governance and Roman technology on the less-developed nations under Roman dominion led to the adoption of Latin phraseology in some specialized areas, such as science, technology, medicine, and law. For example, the Linnaean system of plant and animal classification was heavily influenced by Historia Naturalis, an encyclopedia of people, places, plants, animals, and things published by Pliny the Elder. Roman medicine, recorded in the works of such physicians as Galen, established that today's medical terminology would be primarily derived from Latin and Greek words, the Greek being filtered through the Latin. Roman engineering had the same effect on scientific terminology as a whole. Latin law principles have survived partly in a long list of Latin legal terms.

A few international auxiliary languages have been heavily influenced by Latin. Interlingua is sometimes considered a simplified, modern version of the language.[dubious ] Latino sine Flexione, popular in the early 20th century, is Latin with its inflections stripped away, among other grammatical changes.

The Logudorese dialect of the Sardinian language and Standard Italian are the two closest contemporary languages to Latin.

Education

A multivolume Latin dictionary in the University of Graz Library in Austria

Throughout European history, an education in the classics was considered crucial for those who wished to join literate circles. This also was true in the United States where many of the nation's founders obtained a classically based education in grammar schools or from tutors. Admission to Harvard in the Colonial era required that the applicant "Can readily make and speak or write true Latin prose and has skill in making verse . . ." Latin Study and the classics were emphasized in American secondary schools and colleges well into the Antebellum era.

Instruction in Latin is an essential aspect. In today's world, a large number of Latin students in the US learn from Wheelock's Latin: The Classic Introductory Latin Course, Based on Ancient Authors. This book, first published in 1956, was written by Frederic M. Wheelock, who received a PhD from Harvard University. Wheelock's Latin has become the standard text for many American introductory Latin courses.

The numbers of people studying Latin varies significantly by country. In the United Kingdom, Latin is available in around 2.3% of state primary schools, representing a significant increase in availability. In Germany, over 500,000 students study Latin each year, representing a decrease from over 800,000 in 2008. Latin is still required for some University courses, but this has become less frequent.

The Living Latin movement attempts to teach Latin in the same way that living languages are taught, as a means of both spoken and written communication. It is available in Vatican City and at some institutions in the US, such as the University of Kentucky and Iowa State University. The British Cambridge University Press is a major supplier of Latin textbooks for all levels, such as the Cambridge Latin Course series. It has also published a subseries of children's texts in Latin by Bell & Forte, which recounts the adventures of a mouse called Minimus.

In the United Kingdom, the Classical Association encourages the study of antiquity through various means, such as publications and grants. The University of Cambridge, the Open University, a number of independent schools, for example Eton, Harrow, Haberdashers' Aske's Boys' School, Merchant Taylors' School, and Rugby, and The Latin Programme/Via Facilis, a London-based charity, run Latin courses. In the United States and in Canada, the American Classical League supports every effort to further the study of classics. Its subsidiaries include the National Junior Classical League (with more than 50,000 members), which encourages high school students to pursue the study of Latin, and the National Senior Classical League, which encourages students to continue their study of the classics into college. The league also sponsors the National Latin Exam. Classicist Mary Beard wrote in The Times Literary Supplement in 2006 that the reason for learning Latin is because of what was written in it.

Official status

Latin was or is the official language of European states:

  •  Hungary – Latin was an official language in the Kingdom of Hungary from the 11th century to the mid 19th century, when Hungarian became the exclusive official language in 1844. The best known Latin language poet of Croatian-Hungarian origin was Janus Pannonius.
  •  Croatia – Latin was the official language of Croatian Parliament (Sabor) from the 13th to the 19th century (1847). The oldest preserved records of the parliamentary sessions (Congregatio Regni totius Sclavonie generalis) – held in Zagreb (Zagabria), Croatia – date from 19 April 1273. An extensive Croatian Latin literature exists. Latin was used on Croatian coins on even years until 1 January 2023, when Croatia adopted the Euro as its official currency.
  •  Poland, Kingdom of Poland – officially recognised and widely used between the 10th and 18th centuries, commonly used in foreign relations and popular as a second language among some of the nobility.

Phonology

The ancient pronunciation of Latin has been reconstructed; among the data used for reconstruction are explicit statements about pronunciation by ancient authors, misspellings, puns, ancient etymologies, the spelling of Latin loanwords in other languages, and the historical development of Romance languages.

Consonants

The consonant phonemes of Classical Latin are as follows:


Labial Dental Palatal Velar Glottal
plain labial
Plosive voiced b d
ɡ ɡʷ
voiceless p t
k
Fricative voiced
(z)



voiceless f s


h
Nasal m n
(ŋ)

Rhotic
r



Approximant
l j
w

/z/ was not native to Classical Latin. It appeared in Greek loanwords starting around the first century BC, when it was probably pronounced (at least by educated speakers) [z] initially and doubled [zz] between vowels, in accordance with its pronunciation in Koine Greek. In Classical Latin poetry, the letter z between vowels always counts as two consonants for metrical purposes. The consonant ⟨b⟩ usually sounds as [b]; however, when ⟨t⟩ or ⟨s⟩ follows ⟨b⟩ then it is pronounced as in [pt] or [ps]. In Latin, ⟨q⟩ is always followed by the vowel ⟨u⟩. Together they make a [kʷ] sound.

In Old and Classical Latin, the Latin alphabet had no distinction between uppercase and lowercase, and the letters ⟨J U W⟩ did not exist. In place of ⟨J U⟩, ⟨I V⟩ were used, respectively; ⟨I V⟩ represented both vowels and consonants. Most of the letter forms were similar to modern uppercase, as can be seen in the inscription from the Colosseum shown at the top of the article.

The spelling systems used in Latin dictionaries and modern editions of Latin texts, however, normally use ⟨j u⟩ in place of Classical-era ⟨i v⟩. Some systems use ⟨j v⟩ for the consonant sounds /j w/ except in the combinations ⟨gu su qu⟩ for which ⟨v⟩ is never used.

Some notes concerning the mapping of Latin phonemes to English graphemes are given below:

Notes
Latin
grapheme
Latin
phoneme
English examples
⟨c⟩, ⟨k⟩ [k] Always as k in sky (/skaɪ/)
⟨t⟩ [t] As t in stay (/steɪ/)
⟨s⟩ [s] As s in say (/seɪ/)
⟨g⟩ [ɡ] Always as g in good (/ɡʊd/)
[ŋ] Before ⟨n⟩, as ng in sing (/sɪŋ/)
⟨n⟩ [n] As n in man (/mæn/)
[ŋ] Before ⟨c⟩, ⟨x⟩, and ⟨g⟩, as ng in sing (/sɪŋ/)
⟨l⟩ [l] When doubled ⟨ll⟩ and before ⟨i⟩, as "light L", [l̥] in link ([l̥ɪnk]) (l exilis)
[ɫ] In all other positions, as "dark L", [ɫ] in bowl ([boʊɫ]) (l pinguis)
⟨qu⟩ [kʷ] Similar to qu in squint (/skwɪnt/)
⟨u⟩ [w] Sometimes at the beginning of a syllable, or after ⟨g⟩ and ⟨s⟩, as /w/ in wine (/waɪn/)
⟨i⟩ [j] Sometimes at the beginning of a syllable, as y (/j/) in yard (/jɑɹd/)
[ij] "y" (/j/), in between vowels, becomes "i-y", being pronounced as parts of two separate syllables, as in capiō (/kapiˈjo:/)
⟨x⟩ [ks] A letter representing ⟨c⟩ + ⟨s⟩: as x in English axe (/æks/)

In Classical Latin, as in modern Italian, double consonant letters were pronounced as long consonant sounds distinct from short versions of the same consonants. Thus the nn in Classical Latin annus "year" (and in Italian anno) is pronounced as a doubled /nn/ as in English unnamed. (In English, distinctive consonant length or doubling occurs only at the boundary between two words or morphemes, as in that example.)

Vowels

Simple vowels


Front Central Back
Close ɪ
ʊ
Mid ɛ
ɔ
Open
a

In Classical Latin, ⟨U⟩ did not exist as a letter distinct from V; the written form ⟨V⟩ was used to represent both a vowel and a consonant. ⟨Y⟩ was adopted to represent upsilon in loanwords from Greek, but it was pronounced like ⟨u⟩ and ⟨i⟩ by some speakers. It was also used in native Latin words by confusion with Greek words of similar meaning, such as sylva and ὕλη.

Classical Latin distinguished between long and short vowels. Then, long vowels, except for ⟨i⟩, were frequently marked using the apex, which was sometimes similar to an acute accent ⟨Á É Ó V́ Ý⟩. Long /iː/ was written using a taller version of ⟨I⟩, called i longa "long I": ⟨ꟾ⟩. In modern texts, long vowels are often indicated by a macron ⟨ā ē ī ō ū⟩, and short vowels are usually unmarked except when it is necessary to distinguish between words, when they are marked with a breve ⟨ă ĕ ĭ ŏ ŭ⟩. However, they would also signify a long vowel by writing the vowel larger than other letters in a word or by repeating the vowel twice in a row. The acute accent, when it is used in modern Latin texts, indicates stress, as in Spanish, rather than length.

Although called long vowels, their exact quality in Classical Latin is different from short vowels. The difference is described in the table below:

Pronunciation of Latin vowels
Latin
grapheme
Latin
phone
modern examples
⟨a⟩ [a] similar to the a in part (/paɹt/)
[aː] similar to the a in father (/fɑːðəɹ/)
⟨e⟩ [ɛ] as e in pet (/pɛt/)
[eː] similar to e in hey (/heɪ/)
⟨i⟩ [ɪ] as i in pit (/pɪt/)
[iː] similar to i in machine (/məʃiːn/)
⟨o⟩ [ɔ] as o in port (/pɔɹt/)
[oː] similar to o in post (/poʊst/)
⟨u⟩ [ʊ] as u in put (/pʊt/)
[uː] similar to ue in true (/tɹuː/)
⟨y⟩ [ʏ] does not exist in English, closest approximation is the u in mule
[yː] does not exist in English, closest approximation is the u in cute

This difference in quality is posited by W. Sidney Allen in his book Vox Latina. However, Andrea Calabrese has disputed this assertion, based in part upon the observation that in Sardinian and some Lucanian dialects, each long and short vowel pair merged, as opposed to in Italo-Western languages in which short /i/ and /u/ merged with long /eː/ and /o:/ (c.f. Latin 'siccus', Italian 'secco', and Sardinian 'siccu').

A vowel letter followed by ⟨m⟩ at the end of a word, or a vowel letter followed by ⟨n⟩ before ⟨s⟩ or ⟨f⟩, represented a short nasal vowel, as in monstrum [mõːstrũ].

Diphthongs

Classical Latin had several diphthongs. The two most common were ⟨ae au⟩. ⟨oe⟩ was fairly rare, and ⟨ui eu ei⟩ were very rare, at least in native Latin words. There has also been debate over whether ⟨ui⟩ is truly a diphthong in Classical Latin, due to its rarity, absence in works of Roman grammarians, and the roots of Classical Latin words (i.e. hui ce to huic, quoi to cui, etc.) not matching or being similar to the pronunciation of classical words if ⟨ui⟩ were to be considered a diphthong.

The sequences sometimes did not represent diphthongs. ⟨ae⟩ and ⟨oe⟩ also represented a sequence of two vowels in different syllables in aēnus [aˈeː.nʊs] "of bronze" and coēpit [kɔˈeː.pɪt] "began", and ⟨au ui eu ei ou⟩ represented sequences of two vowels or of a vowel and one of the semivowels /j w/, in cavē [ˈka.weː] "beware!", cuius [ˈkʊj.jʊs] "whose", monuī [ˈmɔn.ʊ.iː] "I warned", solvī [ˈsɔɫ.wiː] "I released", dēlēvī [deːˈleː.wiː] "I destroyed", eius [ˈɛj.jʊs] "his", and novus [ˈnɔ.wʊs] "new".

Old Latin had more diphthongs, but most of them changed into long vowels in Classical Latin. The Old Latin diphthong ⟨ai⟩ and the sequence ⟨āī⟩ became Classical ⟨ae⟩. Old Latin ⟨oi⟩ and ⟨ou⟩ changed to Classical ⟨ū⟩, except in a few words whose ⟨oi⟩ became Classical ⟨oe⟩. These two developments sometimes occurred in different words from the same root: for instance, Classical poena "punishment" and pūnīre "to punish". Early Old Latin ⟨ei⟩ usually monophthongized to a later Old Latin ⟨ē⟩, to Classical ⟨ī⟩.

By the late Roman Empire, ⟨ae oe⟩ had merged with ⟨e ē⟩. During the Classical period this sound change was present in some rural dialects, but deliberately avoided by well-educated speakers.

Diphthongs classified by beginning sound

Front Back
Close
ui /ui̯/
Mid ei /ei̯/
eu /eu̯/
oe /oe̯/
ou /ou̯/
Open ae /ae̯/
au /au̯/

Syllables

Syllables in Latin are signified by the presence of diphthongs and vowels. The number of syllables is the same as the number of vowel sounds.

Further, if a consonant separates two vowels, it will go into the syllable of the second vowel. When there are two consonants between vowels, the last consonant will go with the second vowel. An exception occurs when a phonetic stop and liquid come together. In this situation, they are thought to be a single consonant, and as such, they will go into the syllable of the second vowel.

Length

Syllables in Latin are considered either long or short (less often called "heavy" and "light" respectively). Within a word, a syllable may either be long by nature or long by position. A syllable is long by nature if it has a diphthong or a long vowel. On the other hand, a syllable is long by position if the vowel is followed by more than one consonant.

Stress

There are two rules that define which syllable is stressed in Classical Latin.

  1. In a word with only two syllables, the emphasis will be on the first syllable.
  2. In a word with more than two syllables, there are two cases.
    • If the second-to-last syllable is long, that syllable will have stress.
    • If the second-to-last syllable is not long, the syllable before that one will be stressed instead.

Orthography

The Duenos Inscription, from the 6th century BC, is one of the earliest known Old Latin texts. It was found on the Quirinal Hill in Rome.

Latin was written in the Latin alphabet (A, B, C, D, E, F, G, H, I, K, L, M, N, O, P, Q, R, S, T, V, X), derived from the Etruscan alphabet, which was in turn drawn from the Greek alphabet and ultimately the Phoenician alphabet. This alphabet has continued to be used over the centuries as the script for the Romance, Celtic, Germanic, Baltic, Finnic and many Slavic languages (Polish, Slovak, Slovene, Croatian, Bosnian, Serbian and Czech); and it has been adopted by many languages around the world, including Vietnamese, the Austronesian languages, many Turkic languages, and most languages in sub-Saharan Africa, the Americas and Oceania, making it by far the world's single most widely used writing system.

The number of letters in the Latin alphabet has varied. When it was first derived from the Etruscan alphabet, it contained only 21 letters. Later, G was added to represent /ɡ/, which had previously been spelled C, and Z ceased to be included in the alphabet, as the language then had no voiced alveolar fricative. The letters Y and Z were later added to represent Greek letters, upsilon and zeta respectively, in Greek loanwords.

W was created in the 11th century from VV. It represented /w/ in Germanic languages, not Latin, which still uses V for the purpose. J was distinguished from the original I only during the late Middle Ages, as was the letter U from V. Although some Latin dictionaries use J, it is rarely used for Latin text, as it was not used in classical times, but many other languages use it.

Punctuation

Classical Latin did not contain sentence punctuation, letter case, or interword spacing, but apices were sometimes used to distinguish length in vowels and the interpunct was used at times to separate words.

The first line of Catullus 3 ("Mourn, O Venuses and Cupids") was originally written as:

simply lv́géteóveneréscupidinésqve
with long I lv́géteóveneréscupIdinésqve
with interpunct lv́géte·ó·venerés·cupidinésqve

It would be rendered in a modern edition as:

simply Lugete, o Veneres Cupidinesque
with macrons Lūgēte, ō Venerēs Cupīdinēsque
with apices Lúgéte, ó Venerés Cupídinésque
A modern Latin text written in the Old Roman Cursive inspired by the Vindolanda tablets, the oldest surviving handwritten documents in Britain. The word Romani ('Romans') is at bottom left.

The Roman cursive script is commonly found on the many wax tablets excavated at sites such as forts, an especially extensive set having been discovered at Vindolanda on Hadrian's Wall in Britain. Most notable is the fact that while most of the Vindolanda tablets show spaces between words, spaces were avoided in monumental inscriptions from that era.

Alternative scripts

Occasionally, Latin has been written in other scripts:

Grammar

Latin is a synthetic, fusional language in the terminology of linguistic typology. Words involve an objective semantic element and markers (usually suffixes) specifying the grammatical use of the word, expressing gender, number, and case in adjectives, nouns, and pronouns (declension) and verbs to denote person, number, tense, voice, mood, and aspect (conjugation). Some words are uninflected and undergo neither process, such as adverbs, prepositions, and interjections.

Latin inflection can result in words with much ambiguity: For example, amābit, "he/she/it will love", is formed from amā-, a future tense morpheme -bi- and a third person singular morpheme, -t, the last of which -t does not express masculine, feminine, or neuter gender. A major task in understanding Latin phrases and clauses is to clarify such ambiguities by an analysis of context.

Nouns

A regular Latin noun belongs to one of five main declensions, a group of nouns with similar inflected forms. The declensions are identified by the genitive singular form of the noun.

  • The first declension, with a predominant ending letter of a, is signified by the genitive singular ending of -ae.
  • The second declension, with a predominant ending letter of us, is signified by the genitive singular ending of -i.
  • The third declension, with a predominant ending letter of i, is signified by the genitive singular ending of -is.
  • The fourth declension, with a predominant ending letter of u, is signified by the genitive singular ending of -ūs.
  • The fifth declension, with a predominant ending letter of e, is signified by the genitive singular ending of -ei.

There are seven Latin noun cases, which also apply to adjectives and pronouns and mark a noun's syntactic role in the sentence by means of inflections. Thus, word order is not as important in Latin as it is in English, which is less inflected. The general structure and word order of a Latin sentence can therefore vary. The cases are as follows:

  1. Nominative – used when the noun is the subject or a predicate nominative. The thing or person acting: the girl ran: puella cucurrit, or cucurrit puella
  2. Genitive – used when the noun is the possessor of or connected with an object: "the horse of the man", or "the man's horse"; in both instances, the word man would be in the genitive case when it is translated into Latin. It also indicates the partitive, in which the material is quantified: "a group of people"; "a number of gifts": people and gifts would be in the genitive case. Some nouns are genitive with special verbs and adjectives: The cup is full of wine. (Poculum plēnum vīnī est.) The master of the slave had beaten him. (Dominus servī eum verberāverat.)
  3. Dative – used when the noun is the indirect object of the sentence, with special verbs, with certain prepositions, and if it is used as agent, reference, or even possessor: The merchant hands the stola to the woman. (Mercātor fēminae stolam trādit.)
  4. Accusative – used when the noun is the direct object of the subject, as the object of a preposition demonstrating place to which, and sometimes to indicate a duration of time: The man killed the boy. (Vir puerum necāvit.)
  5. Ablative – used when the noun demonstrates separation or movement from a source, cause, agent or instrument or when the noun is used as the object of certain prepositions, and to indicate a specific place in time.; adverbial: You walked with the boy. (Cum puerō ambulāvistī.)
  6. Vocative – used when the noun is used in a direct address. The vocative form of a noun is often the same as the nominative, with the exception of second-declension nouns ending in -us. The -us becomes an -e in the vocative singular. If it ends in -ius (such as fīlius), the ending is just (filī), as distinct from the nominative plural (filiī) in the vocative singular: "Master!" shouted the slave. ("Domine!" clāmāvit servus.)
  7. Locative – used to indicate a location (corresponding to the English "in" or "at"). It is far less common than the other six cases of Latin nouns and usually applies to cities and small towns and islands along with a few common nouns, such as the words domus (house), humus (ground), and rus (country). In the singular of the first and second declensions, its form coincides with the genitive (Roma becomes Romae, "in Rome"). In the plural of all declensions and the singular of the other declensions, it coincides with the ablative (Athēnae becomes Athēnīs, "at Athens"). In the fourth-declension word domus, the locative form, domī ("at home") differs from the standard form of all other cases.

Latin lacks both definite and indefinite articles so puer currit can mean either "the boy is running" or "a boy is running".

Adjectives

There are two types of regular Latin adjectives: first- and second-declension and third-declension. They are so-called because their forms are similar or identical to first- and second-declension and third-declension nouns, respectively. Latin adjectives also have comparative and superlative forms. There are also a number of Latin participles.

Latin numbers are sometimes declined as adjectives. See Numbers below.

First- and second-declension adjectives are declined like first-declension nouns for the feminine forms and like second-declension nouns for the masculine and neuter forms. For example, for mortuus, mortua, mortuum (dead), mortua is declined like a regular first-declension noun (such as puella (girl)), mortuus is declined like a regular second-declension masculine noun (such as dominus (lord, master)), and mortuum is declined like a regular second-declension neuter noun (such as auxilium (help)).

Third-declension adjectives are mostly declined like normal third-declension nouns, with a few exceptions. In the plural nominative neuter, for example, the ending is -ia (omnia (all, everything)), and for third-declension nouns, the plural nominative neuter ending is -a or -ia (capita (heads), animalia (animals)) They can have one, two or three forms for the masculine, feminine, and neuter nominative singular.

Participles

Latin participles, like English participles, are formed from a verb. There are a few main types of participles: Present Active Participles, Perfect Passive Participles, Future Active Participles, and Future Passive Participles.

Prepositions

Latin sometimes uses prepositions, depending on the type of prepositional phrase being used. Most prepositions are followed by a noun in either the accusative or ablative case: "apud puerum" (with the boy), with "puerum" being the accusative form of "puer", boy, and "sine puero" (without the boy), "puero" being the ablative form of "puer". A few adpositions, however, govern a noun in the genitive (such as "gratia" and "tenus").

Verbs

A regular verb in Latin belongs to one of four main conjugations. A conjugation is "a class of verbs with similar inflected forms." The conjugations are identified by the last letter of the verb's present stem. The present stem can be found by omitting the -re (- in deponent verbs) ending from the present infinitive form. The infinitive of the first conjugation ends in -ā-re or -ā-ri (active and passive respectively): amāre, "to love", hortārī, "to exhort"; of the second conjugation by -ē-re or -ē-rī: monēre, "to warn", verērī, "to fear;" of the third conjugation by -ere, : dūcere, "to lead", ūtī, "to use"; of the fourth by -ī-re, -ī-rī: audīre, "to hear", experīrī, "to attempt". The stem categories descend from Indo-European and can therefore be compared to similar conjugations in other Indo-European languages.

Irregular verbs are verbs that do not follow the regular conjugations in the formation of the inflected form. Irregular verbs in Latin are esse, "to be"; velle, "to want"; ferre, "to carry"; edere, "to eat"; dare, "to give"; ire, "to go"; posse, "to be able"; fieri, "to happen"; and their compounds.

There are six simple tenses in Latin (present, imperfect, future, perfect, pluperfect and future perfect), three moods (indicative, imperative and subjunctive, in addition to the infinitive, participle, gerund, gerundive and supine), three persons (first, second and third), two numbers (singular and plural), two voices (active and passive) and two aspects (perfective and imperfective). Verbs are described by four principal parts:

  1. The first principal part is the first-person singular, present tense, active voice, indicative mood form of the verb. If the verb is impersonal, the first principal part will be in the third-person singular.
  2. The second principal part is the present active infinitive.
  3. The third principal part is the first-person singular, perfect active indicative form. Like the first principal part, if the verb is impersonal, the third principal part will be in the third-person singular.
  4. The fourth principal part is the supine form, or alternatively, the nominative singular of the perfect passive participle form of the verb. The fourth principal part can show one gender of the participle or all three genders (-us for masculine, -a for feminine and -um for neuter) in the nominative singular. The fourth principal part will be the future participle if the verb cannot be made passive. Most modern Latin dictionaries, if they show only one gender, tend to show the masculine; but many older dictionaries instead show the neuter, as it coincides with the supine. The fourth principal part is sometimes omitted for intransitive verbs, but strictly in Latin, they can be made passive if they are used impersonally, and the supine exists for such verbs.

The six simple tenses of Latin are divided into two systems: the present system, which is made up of the present, imperfect and future forms, and the perfect system, which is made up of the perfect, pluperfect and future perfect forms. Each simple tense has a set of endings corresponding to the person, number, and voice of the subject. Subject (nominative) pronouns are generally omitted for the first (I, we) and second (you) persons except for emphasis.

The table below displays the common inflected endings for the indicative mood in the active voice in all six tenses. For the future tense, the first listed endings are for the first and second conjugations, and the second listed endings are for the third and fourth conjugations:

Tense Singular Plural
1st Person 2nd Person 3rd Person 1st Person 2nd Person 3rd Person
Present -ō/m -s -t -mus -tis -nt
Future -bō, -am -bis, -ēs -bit, -et -bimus, -ēmus -bitis, -ētis -bunt, -ent
Imperfect -bam -bās -bat -bāmus -bātis -bant
Perfect -istī -it -imus -istis -ērunt
Future Perfect -erō -eris/erīs -erit -erimus/-erīmus -eritis/-erītis -erint
Pluperfect -eram -erās -erat -erāmus -erātis -erant

Deponent verbs

Some Latin verbs are deponent, causing their forms to be in the passive voice but retain an active meaning: hortor, hortārī, hortātus sum (to urge).

Vocabulary

As Latin is an Italic language, most of its vocabulary is likewise Italic, ultimately from the ancestral Proto-Indo-European language. However, because of close cultural interaction, the Romans not only adapted the Etruscan alphabet to form the Latin alphabet but also borrowed some Etruscan words into their language, including persona "mask" and histrio "actor". Latin also included vocabulary borrowed from Oscan, another Italic language.

After the Fall of Tarentum (272 BC), the Romans began Hellenising, or adopting features of Greek culture, including the borrowing of Greek words, such as camera (vaulted roof), sumbolum (symbol), and balineum (bath). This Hellenisation led to the addition of "Y" and "Z" to the alphabet to represent Greek sounds. Subsequently, the Romans transplanted Greek art, medicine, science and philosophy to Italy, paying almost any price to entice Greek skilled and educated persons to Rome and sending their youth to be educated in Greece. Thus, many Latin scientific and philosophical words were Greek loanwords or had their meanings expanded by association with Greek words, as ars (craft) and τέχνη (art).

Because of the Roman Empire's expansion and subsequent trade with outlying European tribes, the Romans borrowed some northern and central European words, such as beber (beaver), of Germanic origin, and bracae (breeches), of Celtic origin. The specific dialects of Latin across Latin-speaking regions of the former Roman Empire after its fall were influenced by languages specific to the regions. The dialects of Latin evolved into different Romance languages.

During and after the adoption of Christianity into Roman society, Christian vocabulary became a part of the language, either from Greek or Hebrew borrowings or as Latin neologisms. Continuing into the Middle Ages, Latin incorporated many more words from surrounding languages, including Old English and other Germanic languages.

Over the ages, Latin-speaking populations produced new adjectives, nouns, and verbs by affixing or compounding meaningful segments. For example, the compound adjective, omnipotens, "all-powerful", was produced from the adjectives omnis, "all", and potens, "powerful", by dropping the final s of omnis and concatenating. Often, the concatenation changed the part of speech, and nouns were produced from verb segments or verbs from nouns and adjectives.

Numbers

In ancient times, numbers in Latin were written only with letters. Today, the numbers can be written with the Arabic numbers as well as with Roman numerals. The numbers 1, 2 and 3 and every whole hundred from 200 to 900 are declined as nouns and adjectives, with some differences.

ūnus, ūna, ūnum (masculine, feminine, neuter) I one
duo, duae, duo (m., f., n.) II two
trēs, tria (m./f., n.) III three
quattuor IIII or IV four
quīnque V five
sex VI six
septem VII seven
octō IIX or VIII eight
novem VIIII or IX nine
decem X ten
quīnquāgintā L fifty
centum C one hundred
quīngentī, quīngentae, quīngenta (m., f., n.) D five hundred
mīlle M one thousand

The numbers from 4 to 100 do not change their endings. As in modern descendants such as Spanish, the gender for naming a number in isolation is masculine, so that "1, 2, 3" is counted as ūnus, duo, trēs.

Example text

Commentarii de Bello Gallico, also called De Bello Gallico (The Gallic War), written by Gaius Julius Caesar, begins with the following passage:

Gallia est omnis divisa in partes tres, quarum unam incolunt Belgae, aliam Aquitani, tertiam qui ipsorum lingua Celtae, nostra Galli appellantur. Hi omnes lingua, institutis, legibus inter se differunt. Gallos ab Aquitanis Garumna flumen, a Belgis Matrona et Sequana dividit. Horum omnium fortissimi sunt Belgae, propterea quod a cultu atque humanitate provinciae longissime absunt, minimeque ad eos mercatores saepe commeant atque ea quae ad effeminandos animos pertinent important, proximique sunt Germanis, qui trans Rhenum incolunt, quibuscum continenter bellum gerunt. Qua de causa Helvetii quoque reliquos Gallos virtute praecedunt, quod fere cotidianis proeliis cum Germanis contendunt, cum aut suis finibus eos prohibent aut ipsi in eorum finibus bellum gerunt. Eorum una pars, quam Gallos obtinere dictum est, initium capit a flumine Rhodano, continetur Garumna flumine, Oceano, finibus Belgarum; attingit etiam ab Sequanis et Helvetiis flumen Rhenum; vergit ad septentriones. Belgae ab extremis Galliae finibus oriuntur; pertinent ad inferiorem partem fluminis Rheni; spectant in septentrionem et orientem solem. Aquitania a Garumna flumine ad Pyrenaeos montes et eam partem Oceani quae est ad Hispaniam pertinet; spectat inter occasum solis et septentriones.

The same text may be marked for all long vowels (before any possible elisions at word boundary) with apices over vowel letters, including customarily before "nf" and "ns" where a long vowel is automatically produced:

Gallia est omnis dívísa in partés trés, quárum únam incolunt Belgae, aliam Aquítání, tertiam quí ipsórum linguá Celtae, nostrá Gallí appellantur. Hí omnés linguá, ínstitútís, légibus inter sé differunt. Gallós ab Aquítánís Garumna flúmen, á Belgís Mátrona et Séquana dívidit. Hórum omnium fortissimí sunt Belgae, proptereá quod á cultú atque húmánitáte próvinciae longissimé absunt, miniméque ad eós mercátórés saepe commeant atque ea quae ad efféminandós animós pertinent important, proximíque sunt Germánís, quí tráns Rhénum incolunt, quibuscum continenter bellum gerunt. Quá dé causá Helvétií quoque reliquós Gallós virtúte praecédunt, quod feré cotídiánís proeliís cum Germánís contendunt, cum aut suís fínibus eós prohibent aut ipsí in eórum fínibus bellum gerunt. Eórum úna pars, quam Gallós obtinére dictum est, initium capit á flúmine Rhodanó, continétur Garumná flúmine, Óceanó, fínibus Belgárum; attingit etiam ab Séquanís et Helvétiís flúmen Rhénum; vergit ad septentriónés. Belgae ab extrémís Galliae fínibus oriuntur; pertinent ad ínferiórem partem flúminis Rhéní; spectant in septentriónem et orientem sólem. Aquítánia á Garumná flúmine ad Pýrénaeós montés et eam partem Óceaní quae est ad Hispániam pertinet; spectat inter occásum sólis et septentriónés.

Tuesday, May 14, 2024

Information asymmetry

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Information_asymmetry
Diagram illustrating the balance of power with perfect information by buyers and sellers.

In contract theory, mechanism design, and economics, an information asymmetry is a situation where one party has more or better information than the other.

Information asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to be inefficient, causing market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and monopolies of knowledge.

A common way to visualise information asymmetry is with a scale, with one side being the seller and the other the buyer. When the seller has more or better information, the transaction will more likely occur in the seller's favour ("the balance of power has shifted to the seller"). An example of this could be when a used car is sold, the seller is likely to have a much better understanding of the car's condition and hence its market value than the buyer, who can only estimate the market value based on the information provided by the seller and their own assessment of the vehicle. The balance of power can, however, also be in the hands of the buyer. When buying health insurance, the buyer is not always required to provide full details of future health risks. By not providing this information to the insurance company, the buyer will pay the same premium as someone much less likely to require a payout in the future. The adjacent image illustrates the balance of power between two agents when there is perfect information. Perfect information means that all parties have complete knowledge. If the buyer has more information, the power to manipulate the transaction will be represented by the scale leaning towards the buyer's side.

Information asymmetry extends to non-economic behaviour. Private firms have better information than regulators about the actions that they would take in the absence of regulation, and the effectiveness of a regulation may be undermined. International relations theory has recognized that wars may be caused by asymmetric information and that "Most of the great wars of the modern era resulted from leaders miscalculating their prospects for victory". Jackson and Morelli wrote that there is asymmetric information between national leaders, when there are differences "in what they know [i.e. believe] about each other's armaments, quality of military personnel and tactics, determination, geography, political climate, or even just about the relative probability of different outcomes" or where they have "incomplete information about the motivations of other agents".

Information asymmetries are studied in the context of principal–agent problems where they are a major cause of misinforming and is essential in every communication process. Information asymmetry is in contrast to perfect information, which is a key assumption in neo-classical economics.

In 1996, a Nobel Memorial Prize in Economics was awarded to James A. Mirrlees and William Vickrey for their "fundamental contributions to the economic theory of incentives under asymmetric information". This led the Nobel Committee to acknowledge the importance of information problems in economics. They later awarded another Nobel Prize in 2001 to George Akerlof, Michael Spence, and Joseph E. Stiglitz for their "analyses of markets with asymmetric information". The 2007 Nobel Memorial Prize in Economic Sciences was awarded to Leonid Hurwicz, Eric Maskin, and Roger Myerson "for having laid the foundations of mechanism design theory", a field dealing with designing markets that encourage participants to honestly reveal their information.

History

The puzzle of information asymmetry has existed for as long as the market itself but remained largely unstudied until the post-WWII period. It is an umbrella term that can contain a vast diversity of topics.

Greek Stoics (2nd century BCE) treated the advantage that sellers derive from privileged information in the story of the Merchant of Rhodes. Accordingly, a famine had broken out on the island of Rhodes and several grain merchants in Alexandria set sail to deliver supplies. One of these merchants who arrives ahead of his competitors faces a choice: should he let Rhodians know that grain supplies are on the way or keep this knowledge to himself? Either decision will determine his profit margin. Cicero related this dilemma in De Officiis and agreed with Greek Stoics that the merchant had a duty to disclose. Thomas Aquinas overturned this consensus and considered price disclosure was not obligatory.

The three topics mentioned above drew on some important predecessors. Joseph Stiglitz considered the work of earlier economists, including Adam Smith, John Stuart Mill, and Max Weber. He ultimately concludes that though these economists seemed to have an understanding of the problems of information, they largely did not consider the implications of them, and tended to minimize the impact they could have or consider them merely secondary issues.

One exception to this is the work of economist Friedrich Hayek. His work with prices as information conveying relative scarcity of goods can be noted as an early form of acknowledging information asymmetry, but with a different name.

2001 Nobel Prize Inspirations

Information problems have always affected the lives of humans, yet it was not studied with any seriousness until near the 1970s when three economists fleshed out models which revolutionized the way we think about information and its interaction with the market. George Akerlof's paper The Market for Lemons introduced a model to help explain a variety of market outcomes when quality is uncertain. Akerlof's primary model considers the automobile market where the seller knows the exact quality of a car. In contrast, the buyer only knows the probability of whether a vehicle is good or bad (a lemon). Since the buyer pays the same price (based on their expected quality) for good cars and bad cars, sellers with high-quality cars may find the transaction unprofitable and leave, resulting in a market with a higher proportion of bad cars. The pathological path can continue as the buyer adjusts the expected quality and offers even lower prices, further driving out cars with not-so-bad quality. This results in a market failure purely driven by information asymmetry, as under perfect information, all cars can be sold according to their quality. Akerlof extends the model to explain other phenomena: Why raising the insurance price cannot facilitate seniors getting medical insurance? Why may employers rationally refuse to hire minorities? Through various applications, Akerlof developed the importance of trust in markets and highlighted the "cost of dishonesty" in insurance markets, credit markets, and developing areas. Around the same time, an economist by the name of Michael Spence wrote on the topic of job market signaling, and was introduced a work of the same name. The final topic is Stiglitz's work on the mechanism of screening. These three economists helped to further clarify a variety of economic puzzles at the time and would go on to win a Nobel Prize in 2001 for their contributions to the field. Since then, several economists have followed in their footsteps to solve more pieces of the puzzle.

Akerlof

Akerlof drew heavily from the work of economist Kenneth Arrow. Arrow, who was awarded a Nobel Prize in Economics in 1972, studied uncertainty in the field of medical care, among other things (Arrow 1963). His work highlighted several factors which became important to Akerlof's studies. First, is the idea of moral hazard. By being insured, customers may be inclined to be less careful than they otherwise would without insurance because they know the costs will be covered. Thus, an incentive to be less careful and increase risk exists. Second, Arrow studied the business models of insurance companies and noted that higher-risk individuals are pooled with lower-risk individuals, but both are covered at the same cost. Third, Arrow noted the role of trust in the relationship between doctor and patient. Medical providers only get paid when a patient is sick, and not when a person is healthy. Because of this, there is a great incentive for doctors to not provide the quality of care they could. A patient must defer to the doctor and trust that the doctor is using their knowledge to their best advantage to provide the patient with the best care. Thus, a relationship of trust is established. According to Arrow, the doctor relies on the social obligation of trust to sell their services to the public, even though the patients do not or cannot inspect the quality of a doctor's work. Last, he notes how this unique relationship demands that high levels of education and certification be attained by doctors in order to maintain the quality of medical service provided by doctors. These four ideas from Arrow contributed largely to Akerlof's work.

Spence

Spence cited no sources for his inspiration. However, he did acknowledge Kenneth Arrow and Thomas Schelling as helpful in discussing ideas during his pursuit of knowledge. He was the first to coin the term "signaling", and encouraged other economists to follow in his footsteps because he believed he had introduced an important concept in economics.

Stiglitz

Most of Stiglitz's academic inspirations were from his contemporaries. Stiglitz primarily attributes his thinking to articles by Spence, Akerlof, and a few earlier works by him and his co-author Michael Rothschild (Rothschild and Stiglitz 1976), each discussing various aspects of screening and the role of education. Stiglitz's work was a complement to the works of Spence and Akerlof and thus drew from some of the same inspirations from Arrow as Akerlof had.

The discussion of information asymmetry came to the forefront of economics in the 1970s when Akerlof introduced the idea of a "market for lemons" in a paper by the same name (Akerlof 1970). In this paper, Akerlof introduced a fundamental concept that certain sellers of used cars have more knowledge than the buyers, and this can lead to what is known as "adverse selection". This idea may be one of the most important in the history and understanding of asymmetric information in economics.

Spence introduced the idea of "signaling" shortly after the publication of Akerlof's work.

Stiglitz expanded upon the ideas of Spence and Akerlof by introducing an economic function of information asymmetry called "screening". Stiglitz's work in this area referred to the market for insurance, which is rife with information asymmetry problems to be studied.

Impact of 2001 Nobel Work

These three economists' simple yet revolutionary work birthed a movement in economics that changed how the field viewed the market forever. No longer can perfect information be assumed in some problems, as in most neoclassical models. Information asymmetry began to grow in prevalence in academic literature. In 1996, a Nobel Prize was given to James Mirrlees and William Vickrey for their research back in the 1970s and 1970s on incentive problems when facing uncertainty under asymmetric information. The impact of such academic work can go unrecognized for decades. Differing from the topics presented by Akerlof, Spence and Stiglitz, Mirrlees and Vickrey focused on how income taxation and auctions can be used as a mechanism to draw out information from market participants efficiently. This award marked the importance of information asymmetry in economics. It began a greater discussion on the topic that later led the Nobel committee to award three economists again in 2001 for significant contributions to the aforementioned topics.

These economists continued after the 1970s to contribute to the field of economics and develop their theories, and they have all had significant impacts. Akerlof's work had more impact than just the market for used cars. The pooling effect in the used car market also happens in the employment market for minorities.

One of the most notable impacts of Akerlof's work is its impact on Keynesian theory. Akerlof argues that the Keynesian theory of unemployment being voluntary implies that quits would rise with unemployment. He argues against his critics by drawing upon reasoning based on psychology and sociology rather than pure economics. He supplemented this with an argument that people do not always behave rationally, but rather information asymmetry leads to only "near rationality", which causes people to deviate from optimal behavior regarding employment practices.

Akerlof continues to champion behavioral economics, that these breaches into the fields of psychology and sociology are profound extensions of information asymmetry.

Stiglitz wrote that the trio's work has created a substantial wave in the field of economics. He notes how he explored the economies of third-world countries, and they seemed to exhibit behavior consistent with their theories. He noted how other economists have referred to gaining information as a transaction cost. Stiglitz also attempts to narrow down the sources of information asymmetries. He ties it back to the nature of each individual having information that others do not. Stiglitz also mentions how information asymmetry can be overcome. He believes there are two crucial things to consider: first, the incentives, and second, the mechanisms for overcoming information asymmetry. He argues that the incentives will always be there because markets are inherently informationally inefficient. If there is an opportunity to profit from gaining knowledge, people will do so. If there is no profit to be had, then people will not do so.

Spence's work on signaling moved on in the 1980s to spawn the field of study known as game theory.

The idea of information asymmetry has also had a significant effect on management research. It continues to offer additional improvements and opportunities as scholars continue their work.

Models

Information asymmetry models assume one party possesses some information that other parties have no access to. Some asymmetric information models can also be used in situations where at least one party can enforce, or effectively retaliate for breaches of, certain parts of an agreement, whereas the other(s) cannot.

Adverse Selection

Akerlof suggested that information asymmetry leads to adverse selections. In adverse selection models, the ignorant party lacks or has differing information while negotiating an agreed understanding of or contract to the transaction. An example of adverse selection is when people who are high-risk are more likely to buy insurance because the insurance company cannot effectively discriminate against them, usually due to lack of information about the particular individual's risk but also sometimes by force of law or other constraints.

Credence Goods fits in the adverse selection model of information asymmetry. These are goods where the buyer lacks the knowledge even after a product is consumed to disguise the product's quality or where the buyer is unaware of the quality needed. An example of this are complex medical treatments such as heart surgery.

Moral Hazard

Moral hazard occurs when the ignorant party lacks information about the performance of the agreed-upon transaction or lacks the ability to retaliate for a breach of the agreement. This can result in a situation where a party is more likely to take risks because they are not fully responsible for the consequences of their actions. An example of moral hazard is when people are more likely to behave recklessly after becoming insured, either because the insurer cannot observe this behaviour or cannot effectively retaliate against it, for example, by failing to renew the insurance. Moral Hazard is not limited to individuals firms can act more recklessly if they know they will be bailed out. For example, banks will allow parties to take out risky loans if they know that the government will bail them out.

Monopolies of Knowledge

In the model of monopolies of knowledge, the ignorant party has no right to access all the critical information about a situation for decision-making. Meaning one party has exclusive control over information. This type of information asymmetry can be seen in government. An example of monopolies of knowledge is that in some enterprises, only high-level management can fully access the corporate information provided by a third party. At the same time, lower-level employees are required to make important decisions with only limited information provided to them.

Solutions

Countermeasures have widely been discussed to reduce information asymmetry. The classic paper on adverse selection is George Akerlof's "The Market for Lemons" from 1970, which brought informational issues to the forefront of economic theory. Exploring signaling and screening, the paper discusses two primary solutions to this problem. A similar concept is moral hazard, which differs from adverse selection at the timing level. While adverse selection affects parties before the interaction, moral hazard affects parties after the interaction. Regulatory instruments such as mandatory information disclosure can also reduce information asymmetry. Warranties can further help mitigate the effect of asymmetric information.

Signalling

Michael Spence originally proposed the idea of signalling. He suggested that in a situation with information asymmetry, it is possible for people to signal their type, thus believably transferring information to the other party and resolving the asymmetry.

This idea was initially studied in the context of matching in the job market. An employer is interested in hiring a new employee who is "skilled in learning". Of course, all prospective employees will claim to be "skilled in learning", but only they know if they really are. This is an information asymmetry.

Spence proposes, for example, that going to college can function as a credible signal of an ability to learn. Assuming that people who are skilled in learning can finish college more easily than people who are unskilled, then by finishing college, the skilled people signal their skills to prospective employers. No matter how much or how little they may have learned in college or what they studied, finishing functions as a signal of their capacity for learning. However, finishing college may merely function as a signal of their ability to pay for college; it may signal the willingness of individuals to adhere to orthodox views, or it may signal a willingness to comply with authority.

Signalling theory can be used in e-commerce research. Information asymmetry in e-commerce comes from information distortion that leads to the buyer's misunderstanding of the seller's true characteristics before the contract. Mavlanova, Benbunan-Fich and Koufaris (2012) noticed that signalling theory explains the relation between signals and qualities, illustrating why some signals are trustworthy and others are not. In e-commerce, signals deliver information about the characteristics of the seller. For instance, high-quality sellers are able to show their identity to buyers by using signs and logos, and then buyers check these signals to evaluate the credibility and validity of a seller's qualities. The study of Mavlanova, Benbunan-Fich and Koufaris (2012) also confirmed that signal usage is different between low-quality and high-quality online sellers. Low-quality sellers are more likely to avoid using expensive, easy-to-verify signals and tend to use fewer signals than high-quality sellers. Thus, signals help reduce information asymmetry.

Screening

Joseph E. Stiglitz pioneered the theory of screening. In this way, the under informed party can induce the other party to reveal their information. They can provide a menu of choices in such a way that the choice depends on the private information of the other party.

The side of asymmetry can occur on either buyer or seller. For example, sellers with better information than buyers include used-car salespeople, mortgage brokers and loan originators, stockbrokers and real estate agents. Alternatively, situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament, life insurance, or sales of old art pieces without a prior professional assessment of their value. This situation was first described by Kenneth J. Arrow in an article on health care in 1963.

George Akerlof, in The Market for Lemons notices that, in such a market, the average value of the commodity tends to go down, even for those of perfectly good quality. Because of information asymmetry, unscrupulous sellers can sell "forgeries" (like replica goods such as watches) and defraud the buyer. Meanwhile, buyers usually do not have enough information to distinguish lemons from quality goods. As a result, many people not willing to risk getting ripped off will avoid certain types of purchases or will not spend as much for a given item. Akerlof demonstrates that it is even possible for the market to decay to the point of nonexistence.

As lower-risk participants leave the pool, expected costs of the pool increase which causes premiums to increase

An example of adverse selection and information asymmetry causing market failure is the market for health insurance. Policies usually group subscribers together, where people can leave, but no one can join after it is set. As health conditions are realized over time, information involving health costs will arise, and low-risk policyholders will realize the mismatch in the premiums and health conditions. Due to this, healthy policyholders are incentivized to leave and reapply to get a cheaper policy that matches their expected health costs, which causes the premiums to increase. As high-risk policyholders are more dependent on insurance, they are stuck with higher premium costs as the group size reduces, which causes premiums to increase even further. This cycle repeats until the high-risk policy holders also find similar health policies with cheaper premiums, in which the initial group disappears. This concept is known as the death spiral and has been researched as early as 1988.

Akerlof also suggests different methods with which information asymmetry can be reduced. One of those instruments that can be used to reduce the information asymmetry between market participants is intermediary market institutions called counteracting institutions, for instance, guarantees for goods. By providing a guarantee, the buyer in the transaction can use extra time to obtain the same amount of information about the good as the seller before the buyer takes on the complete risk of the good being a "lemon". Other market mechanisms that help reduce the imbalance in information include brand names, chains and franchising that guarantee the buyer a threshold quality level. These mechanisms also let owners of high-quality products get the full value of the goods. These counteracting institutions then keep the market size from reducing to zero.

Warranty

Warranties are utilised as a method of verifying the credibility of a product and are a guarantee issued by the seller promising to replace or repair the good should the quality not be sufficient. Product warranties are often requested from buying parties or financial lenders and have been used as a form of mediation dating back to the Babylonian era. Warranties can come in the form of insurance and can also come at the expense of the buyer. The implementation of "lemon laws" has eradicated the effect of information asymmetry upon customers who have received a faulty item. Essentially, this involves the customers returning a defective product regardless of circumstances within a certain time period.

Mandatory information disclosure

Both signaling and screening resemble voluntary information disclosure, where the party having more information, for their own best interest, use various measures to inform the other party. However, voluntary information disclosure is not always feasible. Regulators can thus take active measures to facilitate the spread of information. For example, the Securities and Exchange Commission (SEC) initiated Regulation Fair Disclosure (RFD) so that companies must faithfully disclose material information to investors. The policy has reduced information asymmetry, reflected in the lower trading costs.

Incentives and penalties

For firms to reduce moral hazard, they can implement penalties for bad behaviour and incentives to align objectives. An example of building in an incentive is insurance companies not insuring customers for the total value; this provides an incentive to be less reckless as the customer will suffer financial liability as well.

Information gathering

Most models in traditional contract theory assume that asymmetric information is exogenously given. Yet, some authors have also studied contract-theoretic models in which asymmetric information arises endogenously because agents decide whether or not to gather information. Specifically, Crémer and Khalil (1992) and Crémer, Khalil, and Rochet (1998a) study an agent's incentives to acquire private information after a principal has offered a contract. In a laboratory experiment, Hoppe and Schmitz (2013) have provided empirical support for the theory. Several further models have been developed which study variants of this setup. For instance, when the agent has not gathered information at the outset, does it make a difference whether or not he learns the information later on, before production starts? What happens if the information can be gathered already before a contract is offered? What happens if the principal observes the agent's decision to acquire information? Finally, the theory has been applied in several contexts, such as public-private partnerships and vertical integration.

Sources

Information asymmetry within societies can be created and maintained in several ways. Firstly, media outlets, due to their ownership structure or political influences, may fail to disseminate certain viewpoints or choose to engage in propaganda campaigns. Furthermore, an educational system relying on substantial tuition fees can generate information imbalances between the poor and the affluent. Imbalances can also be fortified by specific organizational and legal measures, such as document classification procedures or non-disclosure clauses. Exclusive information networks that are operational around the world further contribute to the asymmetry. Copyright laws increase information imbalances between the poor and the affluent. Lastly, mass surveillance helps the political and industrial leaders to amass large volumes of information, which is typically not shared with the rest of society.

Market impact

Zavolokina, Schlegel, and Schwabe (2020) state that Information asymmetry makes buyers and sellers distrust each other, which leads to opportunistic behaviour and may even lead to complete break down of the market. At the same time, lower quality provision in markets is also one of the consequences, as sellers do not get benefits enough to cover their production costs of providing higher quality products.

Countermeasures

  • Abito, Jose Miguel, & Salant, Yuval proposed that warranty enhancing consumer welfare highlights the relevance of policies that directly guide consumer decisions and increases buyers' trust in high-quality buyers.
  • Establish a real-time information announce platform, according to the collect information to achieve market transparency,eliminate trading concerns thereby.
  • Enhance customer experience by third-party quality checks like providing expert reviews.
  • Consumer protection law ensure that product quality meets expectations and that contract terms are fair.
  • Ensure quality in the form of standards and certificates and prove that all technical parameters have been tested.

Application in research

Accounting and finance

A substantial portion of research in the field of accounting can be framed in terms of information asymmetry, since accounting involves the transmission of an enterprise's information from those who have it to those who need it for decision-making. Bartov and Bodnar (1996) mentioned that the different accounting methods used by enterprises can lead to information asymmetry. For instance aggressively recognising revenue can result in preparers of financial statements having a much better understanding of the levels of future revenue then those reading the statements. Likewise, in finance literature, the acknowledgment of information asymmetry between organizations challenged the Modigliani–Miller theorem, which states that the valuation of a firm is unaffected by its financial structure. It challenges the theorem as one of the key assumptions is that investors would have the same information as a corporation. If there is not symmetry in information corporations can leverage their capital structure to get the most out of their valuation. Information asymmetry shed light on the importance of aligning interests of managers with those of stakeholders. As managers with significant power from information may make decision based on their own interest as opposed to the companies. When the level of information asymmetry and associated monitoring cost is high, firms tend to rely less on board monitoring and more on incentive alignment. Various measures are used to align interest of managers to stop them from abusing their power from information asymmetry such as compensating based on performance using a bonus structure. This field of study is referred to as agency theory. Furthermore, financial economists apply information asymmetry in studies of differentially informed financial market participants (insiders, stock analysts, investors, etc.) or in the cost of finance for MFIs.

Effect of blogging

The effect of blogging as a source of information asymmetry as well as a tool reduce asymmetric information has also been well studied. Blogging on financial websites provides bottom-up communication among investors, analysts, journalists, and academics, as financial blogs help prevent people in charge from withholding financial information from their company and the general public. Compared to traditional forms of media such as newspapers and magazines, blogging provides an easy-to-access venue for information. A 2013 study by Gregory Saxton and Ashley Anker concluded that more participation on blogging sites from credible individuals reduces information asymmetry between corporate insiders, additionally reducing the risk of insider trading.

A game of imperfect information with sub-games. Here each player will have no information of each other's move while making decisions. This representation is of one person's decisions in a game, however, it does not correspond to the actual timing of the player's decisions. The dashed line between nodes represent information asymmetry and show that, during the game, a party cannot distinguish between the nodes.

Game theory

Game theory can be used to analyse asymmetric information. A large amount of the foundational ideas in game theory builds on the framework of information asymmetry. In simultaneous games, each player has no prior knowledge of an opponent's move. In sequential games, players may observe all or part of the opponent's moves. One example of information asymmetry is one player can observe the opponent's past activities while the other player cannot. Therefore, the existence and level of information asymmetry in a game determines the dynamics of the game. James Fearon in his study of the explanations for war in a game theoretic context notices that war could be a consequence of information asymmetry – two countries will not reach a non-violent settlement because they have incentives to distort the amount of military resources they possess.

Contract theory

Contract theory provides insights into how various economic agents can enter contractual arrangements in situation of unequal levels of information. The development of contract theory is based on assuming its parties possess different levels of information on the contract's subject. For instance, in a road construction contract, a civil engineer may have more information on the various inputs required to undertake the project, than the other parties. Through contract theory, economic agents gain insights on how they can exploit information available to them, to enter beneficial contractual arrangements. The impact information asymmetry causes among parties with competing interests, such as games, has contributed to game theory. In no game do its players have complete information about each other; most importantly, no player knows the strategy the others intends to use to realize a win. This information asymmetry, together with the competing interests have resulted in the development of game theory (which seeks to provides insights as to how parties caught up in a situation where they are required to compete under a set of rules, can maximize their expected outcomes).

Information asymmetry occurs in situations where some parties have more information regarding an issue than others. It is considered a major cause of market failure. The contribution of information asymmetry to market failure arises from the fact that it impairs with the free hand which is expected to guide how modern markets work. For example, the stock market forms a major avenue through which publicly traded entities can raise their capital. The operation of stock markets across the world, is carried in a way that ensures current and potential investors have the same level of information about the stocks or any other securities that may be listed in that market. That level of information symmetry helps to ensure similar conditions to all parties in the market, which in turn helps to ensure the securities listed in those markets trade at fair value. However, cases of information sometimes arise, when certain parties obtain information that is not in the public domain. This can create market return abnormalities, such as an abrupt surge or decline in a security.

Artificial intelligence

Tshilidzi Marwala and Evan Hurwitz in their study of the relationship between information asymmetry and artificial intelligence observed that there is a reduced level of information asymmetry between two artificial intelligent agents than between two human agents. As a consequence, when these artificial intelligent agents engage in financial markets it reduces arbitrage opportunities making markets more efficient. The study also revealed that as the number of artificial intelligent agents in the market increase, the volume of trades in the market will decrease. This is primarily because information asymmetry of the perceptions of value of goods and services is the basis of trade.

Management

Information asymmetry has been applied in a variety of ways in management research ranging from conceptualizations of information asymmetry to building resolutions to reduce it. Studies have shown that information asymmetry can be a source of competitive advantage for the firms. A 2013 study by Schmidt and Keil has revealed that the presence of private information asymmetry within firms influences normal business activities. Firms that have a more concrete understanding of their resources can use this information to gauge their advantage over competitors. In Ozeml, Reuer and Gulati's 2013 study, they found that 'different information' was an additional source of information asymmetry in venture capitalist and alliance networks; when different team members bring diverse, specialized knowledge, values and outlooks towards a common strategic decision, the lack of homogeneous information distribution among the members leads to inefficient decision making.

Firms have the ability to apply strategies that exploit their informational gap. One way they can do this is through impression management, which involves undertaking actions and releasing information to influence stakeholders' and analysts' opinions positively, exploiting information asymmetry as external parties heavily rely on the information released by firms. A second way that firms exploit information asymmetry is through decoupling. This describes the discrepancy between formal procedures and failure to implement them. An example of this is executives announcing a stock repurchase plan without any intention of carrying it out, allowing them to raise new cash flow for their own benefit at the expense of shareholders. Management research goes on to explain that agents can perpetuate information asymmetry through information concealment. This involves firms not sharing information to exploit the informational advantage over rivals. In resource-based theory, it shows firms concealing information about their competitive advantage in order to build causal ambiguity to protect their firm from imitation.

Information asymmetry problems can be addressed by management through several approaches. First is the usage of incentives to encourage the disclosure and sharing information. An example of this is partnering specifically with companies that disclose relatively more information. Second, is through precommitment, where actions are undertaken at present to ensure future commitments. Third, is the usage of an information intermediary in which an intermediary is used to gather and relay information between two parties. A common example of this are financial analysts that gather information from the financial statements of a company, and uses it to create reports and advice for potential investors and clients. Fourth, is the usage of monitoring and reward. Monitoring allows management to confirm information that was previously uncertain, such as performance and behaviour. Monitoring can also be used alongside other incentives such as rewarding for performance.

Online Advertising

Online advertising is a dominant form of advertising, and a potential source of information asymmetry. Online advertising consists of utilities(a good) being encoded into a message received by a customer who decodes the message, making a purchasing decision. Firms' messages are tailored to specific goals and intentions, and can be a source of information asymmetry due to interpretation, or intent. The nature of the internet and prevalence of social media in society has given firms opportunities to create promotional content in a less passive way than other forms of advertising. 'Noise' represents any techniques that are used with the intent of obstructing, altering, or blocking the interpretation of the message by the receiver. This can increase the amount of information asymmetry in a transaction, as the buyer may not understand the product to its fullest extent, even if they believe to fully understand the message being sent to them.

Firms communicate to the virtual marketplace through online advertising, and as such the feedback of consumers feeling manipulated or feeling the presence of information asymmetry may be indicative of the lack of transparency by a firm. Highly advertised and strongly promoted items are generally more likely to be bought by customers, even if the product is inferior to less advertised competition, introducing adverse selection. The power of the internet also changes how consumers deal with information asymmetry, as they have the means to find vast amounts of information about products with relatively little effort. While a consumer can use this power to assist their research to find a product that is not being marketed maliciously, this decision is made due to information asymmetry, not due to the customer being perfectly rational.

Some consumers are aware of the usage of strategies and techniques by firms to advertise and influence their media consumption, however do not necessarily alter their trust in the source of the information accordingly. Online advertising that appears trustworthy but can be malicious in intent can still be trusted by consumers, despite the information asymmetry, even if consumers themselves identify as critical of the medium. Social media personalities, much like other celebrities, also have influence over consumers who would otherwise consider themselves dissuaded by the advertising, providing firms another method of aggressive advertising with potential information asymmetry.

At-will employment

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/At-will_employment

In United States labor law, at-will employment is an employer's ability to dismiss an employee for any reason (that is, without having to establish "just cause" for termination), and without warning, as long as the reason is not illegal (e.g. firing because of the employee's gender, sexual orientation, race, religion, or disability status). When an employee is acknowledged as being hired "at will", courts deny the employee any claim for loss resulting from the dismissal. The rule is justified by its proponents on the basis that an employee may be similarly entitled to leave their job without reason or warning. The practice is seen as unjust by those who view the employment relationship as characterized by inequality of bargaining power.

At-will employment gradually became the default rule under the common law of the employment contract in most U.S. states during the late 19th century, and was endorsed by the U.S. Supreme Court during the Lochner era, when members of the U.S. judiciary consciously sought to prevent government regulation of labor markets. Over the 20th century, many states modified the rule by adding an increasing number of exceptions, or by changing the default expectations in the employment contract altogether. In workplaces with a trade union recognized for purposes of collective bargaining, and in many public sector jobs, the normal standard for dismissal is that the employer must have a "just cause". Otherwise, subject to statutory rights (particularly the discrimination prohibitions under the Civil Rights Act), most states adhere to the general principle that employer and employee may contract for the dismissal protection they choose. At-will employment remains controversial, and remains a central topic of debate in the study of law and economics, especially with regard to the macroeconomic efficiency of allowing employers to summarily and arbitrarily terminate employees.

Definition

At-will employment is generally described as follows: "any hiring is presumed to be 'at will'; that is, the employer is free to discharge individuals 'for good cause, or bad cause, or no cause at all,' and the employee is equally free to quit, strike, or otherwise cease work."[6] In an October 2000 decision largely reaffirming employers' rights under the at-will doctrine, the Supreme Court of California explained:

Labor Code section 2922 establishes the presumption that an employer may terminate its employees at will, for any or no reason. A fortiori, the employer may act peremptorily, arbitrarily, or inconsistently, without providing specific protections such as prior warning, fair procedures, objective evaluation, or preferential reassignment. Because the employment relationship is "fundamentally contractual" (Foley, supra, 47 Cal.3d 654, 696), limitations on these employer prerogatives are a matter of the parties' specific agreement, express or implied in fact. The mere existence of an employment relationship affords no expectation, protectible by law, that employment will continue, or will end only on certain conditions, unless the parties have actually adopted such terms. Thus if the employer's termination decisions, however arbitrary, do not breach such a substantive contract provision, they are not precluded by the covenant.

At-will employment disclaimers are a staple of employee handbooks in the United States. It is common for employers to define what at-will employment means, explain that an employee's at-will status cannot be changed except in a writing signed by the company president (or chief executive), and require that an employee sign an acknowledgment of their at-will status. However, the National Labor Relations Board has opposed as unlawful the practice of including in such disclaimers language declaring that the at-will nature of the employment cannot be changed without the written consent of senior management.

History

The original common law rule for dismissal of employees according to William Blackstone envisaged that, unless another practice was agreed, employees would be deemed to be hired for a fixed term of one year. Over the 19th century, most states in the North adhered to the rule that the period by which an employee was paid (a week, a month or a year) determined the period of notice that should be given before a dismissal was effective. For instance, in 1870 in Massachusetts, Tatterson v. Suffolk Manufacturing Company held that an employee's term of hiring dictated the default period of notice. By contrast, in Tennessee, a court stated in 1884 that an employer should be allowed to dismiss any worker, or any number of workers, for any reason at all. An individual, or a collective agreement, according to the general doctrine of freedom of contract could always stipulate that an employee should only be dismissed for a good reason, or a "just cause", or that elected employee representatives would have a say on whether a dismissal should take effect. However, the position of the typical 19th-century worker meant that this was rare.

The at-will practice is typically traced to a treatise published by Horace Gray Wood in 1877, called Master and Servant. Wood cited four U.S. cases as authority for his rule that when a hiring was indefinite, the burden of proof was on the servant to prove that an indefinite employment term was for one year. In Toussaint v. Blue Cross & Blue Shield of Michigan, the Court noted that "Wood's rule was quickly cited as authority for another proposition." Wood, however, misinterpreted two of the cases which in fact showed that in Massachusetts and Michigan, at least, the rule was that employees should have notice before dismissal according to the periods of their contract.

In New York, the first case to adopt Wood's rule was Martin v. New York Life Insurance Company (1895). Justice Edward T. Bartlett wrote that New York law now followed Wood's treatise, which meant that an employee who received $10,000, paid in a salary over a year, could be dismissed immediately. The case did not make reference to the previous authority. Four years earlier, Adams v. Fitzpatrick (1891) had held that New York law followed the general practice of requiring notice similar to pay periods. However, subsequent New York cases continued to follow the at-will rule into the early 20th century.

Some courts saw the rule as requiring the employee to prove an express contract for a definite term in order to maintain an action based on termination of the employment. Thus was born the U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by all U.S. states. In 1959, the first judicial exception to the at-will rule was created by one of the California Courts of Appeal. Later, in a 1980 landmark case involving ARCO, the Supreme Court of California endorsed the rule first articulated by the Court of Appeal. The resulting civil actions by employees are now known in California as Tameny actions for wrongful termination in violation of public policy.

Since 1959, several common law and statutory exceptions to at-will employment have been created.

Common law protects an employee from retaliation if the employee disobeys an employer on the grounds that the employer ordered him or her to do something illegal or immoral. However, in the majority of cases, the burden of proof remains upon the discharged employee. No U.S. state but Montana has chosen to statutorily modify the employment at-will rule. In 1987, the Montana legislature passed the Wrongful Discharge from Employment Act (WDEA). The WDEA is unique in that, although it purports to preserve the at-will concept in employment law, it also expressly enumerates the legal basis for a wrongful discharge action. Under the WDEA, a discharge is wrongful only if: "it was in retaliation for the employee's refusal to violate public policy or for reporting a violation of public policy; the discharge was not for good cause and the employee had completed the employer's probationary period of employment; or the employer violated the express provisions of its own written personnel policy."

The doctrine of at-will employment can be overridden by an express contract or civil service statutes (in the case of government employees). As many as 34% of all U.S. employees apparently enjoy the protection of some kind of "just cause" or objectively reasonable requirement for termination that takes them out of the pure "at-will" category, including the 7.5% of unionized private-sector workers, the 0.8% of nonunion private-sector workers protected by union contracts, the 15% of nonunion private-sector workers with individual express contracts that override the at-will doctrine, and the 16% of the total workforce who enjoy civil service protections as public-sector employees.

By state

Public policy exceptions

U.S. states (pink) with a public policy exception

Under the public policy exception, an employer may not fire an employee if the termination would violate the state's public policy doctrine or a state or federal statute.

This includes retaliating against an employee for performing an action that complies with public policy (such as repeatedly warning that the employer is shipping defective airplane parts in violation of safety regulations promulgated pursuant to the Federal Aviation Act of 1958), as well as refusing to perform an action that would violate public policy. In this diagram, the pink states have the 'exception', which protects the employee.

As of October 2000, 42 U.S. states and the District of Columbia recognize public policy as an exception to the at-will rule.

The 8 states which do not have the exception are:

Implied contract exceptions

U.S. states (pink) with an implied-contract exception

Thirty-six U.S. states (and the District of Columbia) also recognize an implied contract as an exception to at-will employment. Under the implied contract exception, an employer may not fire an employee "when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists." Proving the terms of an implied contract is often difficult, and the burden of proof is on the fired employee. Implied employment contracts are most often found when an employer's personnel policies or handbooks indicate that an employee will not be fired except for good cause or specify a process for firing. If the employer fires the employee in violation of an implied employment contract, the employer may be found liable for breach of contract.

Thirty-six U.S. states have an implied-contract exception. The 14 states having no such exception are:

The implied-contract theory to circumvent at-will employment must be treated with caution. In 2006, the Supreme Court of Texas in Matagorda County Hospital District v. Burwell held that a provision in an employee handbook stating that dismissal may be for cause, and requiring employee records to specify the reason for termination, did not modify an employee's at-will employment. The New York Court of Appeals, that state's highest court, also rejected the implied-contract theory to circumvent employment at will. In Anthony Lobosco, Appellant v. New York Telephone Company/NYNEX, Respondent, the court restated the prevailing rule that an employee could not maintain an action for wrongful discharge where state law recognized neither the tort of wrongful discharge, nor exceptions for firings that violate public policy, and an employee's explicit employee handbook disclaimer preserved the at-will employment relationship. In the same 2000 decision mentioned above, the Supreme Court of California held that the length of an employee's long and successful service, standing alone, is not evidence in and of itself of an implied-in-fact contract not to terminate except for cause.

"Implied-in-law" contracts

U.S. states (pink) with a covenant-of-good-faith-and-fair-dealing exception

Eleven US states have recognized a breach of an implied covenant of good faith and fair dealing as an exception to at-will employment. The states are:

Court interpretations of this have varied from requiring "just cause" to denial of terminations made for malicious reasons, such as terminating a long-tenured employee solely to avoid the obligation of paying the employee's accrued retirement benefits. Other court rulings have denied the exception, holding that it is too burdensome upon the court for it to have to determine an employer's true motivation for terminating an employee.

Statutory exceptions

Every state, including Montana, is at-will by default. However, Montana defaults to a probationary period, after which termination is only lawful if for good cause.

Although all U.S. states have a number of statutory protections for employees, wrongful termination lawsuits brought under statutory causes of action typically use the federal anti-discrimination statutes, which prohibit firing or refusing to hire an employee because of race, color, religion, sex, national origin, age, or handicap status. Other reasons an employer may not use to fire an at-will employee are:

  • for refusing to commit illegal acts – an employer is not permitted to fire an employee because the employee refuses to commit an act that is illegal.
  • family or medical leave – federal law permits most employees to take a leave of absence for specific family or medical problems. An employer is not permitted to fire an employee who takes family or medical leave for a reason outlined in the Family and Medical Leave Act of 1993.
  • in retaliation against the employee for a protected action taken by the employee – "protected actions" include suing for wrongful termination, testifying as a witness in a wrongful termination case, or even opposing what they believe, whether they can prove it or not, to be wrongful discrimination. In the federal case of Ross v. Vanguard, Raymond Ross successfully sued his employer for firing him due to his allegations of racial discrimination.

Examples of federal statutes include:

  • The Equal Pay Act of 1963 (relating to discrimination on the basis of sex in payment of wages);
  • Title VII of the Civil Rights Act of 1964 (relating to discrimination on the basis of race, color, religion, sex, or national origin);
  • The Age Discrimination in Employment Act of 1967 (relating to certain discrimination on the basis of age with respect to persons of at least 40 years of age);
  • The Rehabilitation Act of 1973 (related to certain discrimination on the basis of handicap status);
  • The Americans with Disabilities Act of 1990 (relating to certain discrimination on the basis of handicap status).
  • The National Labor Relations Act (NLRA) provides protection to employees who wish to join or form a union and those who engage in union activity. The act also protects employees who engage in a concerted activity. Most employers set forth their workplace rules and policies in an employee handbook. A common provision in those handbooks is a statement that employment with the employer is "at-will". In 2012, the National Labor Relations Board, the federal administrative agency responsible for enforcing the NLRA, instituted two cases attacking at-will employment disclaimers in employee handbooks. The NLRB challenged broadly worded disclaimers, alleging that the statements improperly suggested that employees could not act concertedly to attempt to change the at-will nature of their employment, and thereby interfered with employees' protected rights under the NLRA.

Controversy

The doctrine of at-will employment has been heavily criticized for its severe harshness upon employees. It has also been criticized as predicated upon flawed assumptions about the inherent distribution of power and information in the employee-employer relationship. On the other hand, libertarian scholars in the field of law and economics such as Professors Richard A. Epstein and Richard Posner credit employment-at-will as a major factor underlying the strength of the U.S. economy.

At-will employment has also been identified as a reason for the success of Silicon Valley as an entrepreneur-friendly environment.

In a 2009 article surveying the academic literature from both U.S. and international sources, University of Virginia law professor J.H. Verkerke explained that "although everyone agrees that raising firing costs must necessarily deter both discharges and new hiring, predictions for all other variables depend heavily on the structure of the model and assumptions about crucial parameters." The detrimental effect of raising firing costs is generally accepted in mainstream economics (particularly neoclassical economics); for example, professors Tyler Cowen and Alex Tabarrok explain in their economics textbook that employers become more reluctant to hire employees if they are uncertain about their ability to immediately fire them. However, according to contract theory, raising firing costs can sometimes be desirable when there are frictions in the working of markets. For instance, Schmitz (2004) argues that employment protection laws can be welfare-enhancing when principal-agent relationships are plagued by asymmetric information.

The first major empirical study on the impact of exceptions to at-will employment was published in 1992 by James N. Dertouzos and Lynn A. Karoly of the RAND Corporation, which found that recognizing tort exceptions to at-will could cause up to a 2.9% decline in aggregate employment and recognizing contract exceptions could cause an additional decline of 1.8%. According to Verkerke, the RAND paper received "considerable attention and publicity". Indeed, it was favorably cited in a 2010 book published by the libertarian Cato Institute.

However, a 2000 paper by Thomas Miles did not find any effect upon aggregate employment, but found that adopting the implied contract exception causes use of temporary employment to rise as much as 15%. Later work by David Autor in the mid-2000s identified multiple flaws in Miles' methodology, found that the implied contract exception decreased aggregate employment 0.8 to 1.6%, and confirmed the outsourcing phenomenon identified by Miles, but also found that the tort exceptions to at-will had no statistically significant influence. Autor and colleagues later found in 2007 that the good faith exception does reduce job flows, and seems to cause labor productivity to rise but total factor productivity to drop. In other words, employers forced to find a "good faith" reason to fire an employee tend to automate operations to avoid hiring new employees, but also suffer an impact on total productivity because of the increased difficulty in discharging unproductive employees.

Other researchers have found that at-will exceptions have a negative effect on the reemployment of terminated workers who have yet to find replacement jobs, while their opponents, citing studies that say "job security has a large negative effect on employment rates," argue that hedonic regressions on at-will exceptions show large negative effects on individual welfare with regard to home values, rents, and wages.

Child abandonment

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