Hmm.
Using a linear programming idea which is what economists like, wherein
a law is represented as a boundary surface that reduces the space you
can search, no. With a smaller space yoiu can do the same or worse,
never better, Admittedly I don't believe that.
On the other hand, we could regard a tax or regulation as a change in
a performance surface, rather than as a constraint. If as you say this
is equally likely to produce good as bad results, we should be
collectively indifferent to random tax or regulatory changes, and the
most successful economy would have a steady stream of somewhat
capricious laws coming and going. Well, maybe, but that's not a
commonly held position.
I think of the market as a local minimization mechanism over a
somewhat wobbly performance space. (Actually some might like to think
of it as a maximixation of profit, but let's leave that monkey wrench
out and minimize cost as we do in other fields.) If that's right, I
note that unlike MCMC algorithms, the market doesn't jump back to its
prior position if it finds a new, less successful adaptation.
Adding a new cost (in the present case, the previously unconsidered
cost of emissions) raises and alters the entire surface; nothing
becomes cheaper but some things get more more-expensive than others.
No individual optimum is better with the cost accounted for than
without as far as global cost goes.
Can that be made up for by a lucky jostle in the right direction?
Well, you're in a high dimensional space which is intrinsically bumpy
and stops at local minima. So I guess you might be lucky but probably
not.
It occurs to me that I'm questioning a fundamental assumption of
Friedman economics here. Oh well. Hardly the first time. So I think a
market is good at finding a local optimum and bad at finding a global
optimum.
It's worse than that. I think the current market status and the shape
of the cost function aren't actually independent. Oh bother. Let's
hurry up and assume that away...
mt
On Sat, Apr 26, 2008 at 2:00 AM, James Annan <[EMAIL PROTECTED]> wrote:
> > Why would
> > adding another layer of complication make us smarter?
>
> If one accepts that the market is not actually perfect, then a priori,
> one might expect a nudge in a random direction to have an even chance of
> making things better or worse. But if one thinks that current behaviour
> is waasteful, then it seems reasonable to also think that a push towards
> greater efficiency would be beneficial.
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