3 ms·
Meaning the market self-adjusts relatively quickly to match a price to the market's demand, and the ability to supply that product. Answer to 1) - Don't confuse
by eggy 11y ago
Meaning the market self-adjusts relatively quickly to match a price to the market's demand, and the ability to supply that product.
Answer to 1) - Don't confuse one person's valuation to the market. Market being plural buyers/sellers, so if you as one person with peanut allergies do not buy peanuts because they are not worth $5 to you due to risk of health issues, it will not change the valuation, especially if the majority of people do not have allergies and enjoy or value peanuts. However, 5 million people going to the hospital with peanut allergies, and a media fear campaign, will send prices plummeting. Markets do not have to be rational, they are not individual rational entities. Just as society is a concept, not an entity. Money is not bad or good; people are, or can be. I like to see market forces like a centrifugal governor on a steam engine [1]. If the pressure goes too high for the system, the weights rotate faster, and centrifugal force lifts the valve, and releases the excess pressure.
Answer to 2) - Sure there are spikes, but like my analogy in #1 above, but the system rapidly compensates and settles on a price that implies a number of people value it at that price.
In general, value is also subjective. A retiree, and a young person starting a family place different values on different things. If they trade something, they both may feel like they gained value in a trade, say, nice golf clubs sold by the older person for extra cash, because they can no longer golf, and a young person who admires classic golf clubs.
- dnautics 11y ago> the system rapidly compensates and settles on a price that implies a number of people value it at that price. I think this is not true. The system tries to settle on a price that implies a sufficient number of people value it at more than that price. Yet, the system ejects players (business failure) which means that the price/market was not accurately gauged (either too high or too low). And this process of ejection is very slow. Price discovery is not an efficient process, and I think Hayek's information problem applies to free markets "only slightly less than" it applies to governments. In short, markets are not efficient, nor is there really much good evidence that they should be, just a belief. > value is also subjective Yes, it is. And that is exactly the reason why even your weak statement "a number of people value it at least that price" - is far far weaker than the OP's statement that markets approximate some representation of social value. I'm personally a staunch defender of free markets, but my defense is not based on effectiveness of markets in organizing society, rather that centralized clearance of value backed by a state entity is an unacceptable and discriminatory marginalization of dissenting value opinions backed by the rod of state enforcement.