On Fri, 13 Oct 2000, Jim Choate wrote:
No stupid, there are lot's of persons called the 'market'. There is no 'market' without those individuals. When the market goes out of equilibrium then free market mechanisms are not enough to correct.
On a similar vein, just about every somehow understandable version of free market theory is based on the assumption of a steady state market. The theory does not include a temporal element. If you want to study those, you're bound for such a quagmire of stochastic nonlinear differential equations that you would not believe. Hence, the global stability of any reasonably realistic model of markets is practically impossible to guarantee with current mathematical tools. It is quite possible for such systems to behave badly enough to kill most of the participants in the market, for instance. Besides, the basic continuity assumptions behind mathematical economics practically guarantee that the theory does not take such possibilities seriously - I know of no models which take into account the discrete, limited number of people participating in the market. Free market theory, though interesting, useful and absolutely much better than most available alternatives simply does not cover it all. It is an abstraction which probably should not be attained any more than the socialist one. Sampo Syreeni <decoy@iki.fi>, aka decoy, student/math/Helsinki university