Brad, The "modern person" doesn't believe in perfect competition. Economists use it to show that actual market competition is less than their perfection.
In fact, the market price mechanism does not establish a perfect equilibrium. It hunts around it, as I've said like a thermostat. So, at any given time, the price may be a little above or a little below the "perfect" price. If there are difficulties in supply, the hunting may go fat from the equilibrium. There are perhaps four general "imperfect" competitions. Direct manipulation of the market, which mostly needs government collusion (preventing imported sugar from reducing the price we pay, for example). This is what Ed wrote about in a recent post. Errors of imperfect information made by buyers and sellers is another, which exercise is uselessly made much of by some economists. You buy tomatoes for a dollar a pound, but Hah! - You could have bought them for 90c across the street! So, the market is imperfect. Wow! Joan Robinson built a career around this. The third example of imperfect competition is the collectible market. The price mechanism handles a shortage by raising prices. This has the effect of speeding production and speeding movement to the market - whereupon the price drops as the goods arrive. Don't think any economist writes about this. When the price of van Gogh's "Irises" is priced at $65 million (as it was) we can't have another half-dozen Irises rushing to market to bring down the price, so it stays up. Incidentally, the buyer resold to Getty at an undisclosed price within a few months. Want to bet? Perhaps $80 million, $90 million? Whatever, that's the collectible market. Economists appear to lump the collectible market in with the normal market process, which helps to account for their hopeless lack of understanding about how people exchange goods and services. But, we can be sure it's pretty imperfect competition. It does enable them to introduce a new meaning for the old term Economic Rent, which change allows them to slap yet another chapter in their texts. In any event, the ordinary collectible market does no harm to the economy, though it might bring riches, or poverty, to individuals. The fourth "imperfect competition" is a collectible market that does do harm to the economy. This is the market in natural resources. I have a draft for you that's been awaiting completion for the last two weeks. Also for Keith and I'll try to finish them before the weekend is over. I'm not sure whether the following note is in the draft, or in a previous post of mine. George likened the earth to a space ship and suggested that all we need do to get anything is to open a hatch and reach in. I pointed to the importance of those who sit on the hatches and won't let us reach in. So, if raw materials are kept from market, or access to land (location) is restricted or prevented, these movements which would bring down prices don't occur - and prices rise with no way to bring them down. (Ed, Oh these equilibria!) So, natural resources, or Land (which was the Classical term) are not subject to the market price mechanism. This make the Land market a choice example of "imperfect" competition. However, mix these together and we can produce not only a complicated mess, but an apparently inexhaustible supply of publications, none (very few) of which grasp any basic problem. Anyway, I must finish off the other post I have for you. Harry ******************************************** Henry George School of Social Science of Los Angeles Box 655 Tujunga CA 91042 Tel: 818 352-4141 -- Fax: 818 353-2242 http://haledward.home.comcast.net ******************************************** -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Brad McCormick, Ed.D. Sent: Sunday, January 11, 2004 11:35 AM To: Ed Weick Cc: Keith Hudson; [EMAIL PROTECTED] Subject: Re: [Futurework] Two sorts of evolutionary economics (the paradoxical relation of pure theory to reality) Ed Weick wrote: > Just a quick comment, Keith, perhaps more later. > > I said: > > Perfect competition is nothing more than a static theoretical > device, not something that you'd find out there in the real economy. [snip] This reminds me of the latest NetFuture newsletter (Steve Talbott) http://www.netfuture.org/ where he does an extensive deconstruction of the limits of physical laws for predicting what hapens to us in the real world. He points out that, in reality, Newton's ideal masses which travel forever in a straight line without change of either speed or direction (etc.) are never encountered: everything we find is in curved motion -- often, as the ancients asserted: circular (or more-or-less circular..) motion. So just as ideal masses going on forever in straight lines end up in cats' ball of yarn coreoraphies of cuvilinear motion -- so too, as you say, the condition for monopoly (circular motion) is perfect competition (straight-line motion). The ancients were unable to penetrate the circles to find the straight lines "underlying"; we are unable to penetrate real economic conditions to find the perfect competition "underlying", and, for all practical purposes, neither of us is/was the worse for it. But the modern person who believes objects really do move in straight lines forever, just like the modern person who beleves in perfect competition, has a grossly distorted view of their environment. Eppur si muove. (--Galileo, which was perhaps more a political than a physics statement). \brad mccormick _______________________________________________ Futurework mailing list [EMAIL PROTECTED] http://fes.uwaterloo.ca/mailman/listinfo/futurework
