Arnold Kling  

Classic Economics

Mason Blogger Bleg... Is Chinese Growth Credible?...

A 2-1/2 minute video lesson, from Milton Friedman. It is based on the story I, Pencil, by Leonard Read.

Thanks to Don Boudreaux for the pointer.

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CATEGORIES: International Trade

COMMENTS (3 to date)
racial halfpipe writes:

dude, you can watch the entirety of friedman's free to choose at

it wails so hard.

Matt writes:

Uncle Milt is simply stating that, to the extent that an economy is stable, then it must be relying on markets with a two force function, price and transaction rate. These are public markets with revealed price information.

Such a theorem relies on square integrability, and that implies tails ends of the distribution where the binomial fails. Not all markets will be free.

Even as a libertarian Milt would have to agree, in large markets with only ten or so players, it is not necessary to reveal prices to the rest of us. Under most micro-economic assumptions, the wealth curve will always end up with the same percentage of un-free markets.

We are still stuck with out evolutionary instinct to keep the same herd variance.

Matt writes:

Here is Mllton's problem at the quantum level.

If, say, the human is comfortable with a market variance of, say 5%, then a high valued, high wealth, free market should have, I think, at least 20 producers. Put this market to the right of the wealth curve, decomposed into markets. This market the last wealthiest thing on the right.

Now, our problem, in quantum world, is the empty spot farther to the right, there is an opportunity for evolution to better approximate the gaussian over a resource field by placing a small, wealthier market there.

So, 3 of the original 20 players collude, price fix, and they get wealthier by out predicting the market, and they form a group farther to the right. However, absent better inventory technology, all that has happened is a cyclic variation in time is induced. Ultimately the economy adjusts back to the previous state, and continues to bounce back and forth between quantum states, and linearly this is seen as cyclic variation in X and in time.

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