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You can't simultaneously believe that the free market tends towards a stable and optimal equilibrium, and also believe that a government subsidy will wildly and
by cia_plant 17y ago
You can't simultaneously believe that the free market tends towards a stable and optimal equilibrium, and also believe that a government subsidy will wildly and erratically impact the market. These two beliefs are mathematically incompatible.
- btilly 17y agoWell obviously you can believe that because there are people who do believe it. As for your mathematically incompatible assertion, the way that the free market tends towards an equilibrium is because of feedback mechanisms that cause behavior change. However in the presence of a government subsidy the price signal of increased tuition does not necessarily cause decreased consumption. This breaks the feedback loop that is supposed to result in equilibrium. This is a fundamental change in the mathematics of the situation, and can justify the belief that the market behaves in radically different ways in the presence of a government subsidy.
- cia_plant 17y agoIf that were the nature of the subsidy, then yes, that would break the tendency to return to equilibrium in the face of altered data. However, only a fraction of tuition is paid by the government, so there is still a significant price signal to the consumer.
- dantheman 17y agoYour statement doesn't make any sense. If the government gives anyone $30,000 to buy a car then this will wildly distort the car industry. Government subsidies have absolutely nothing to do with a free market.