>The true price of an object is determined by an enormous number of variables
>and is much too complicated to be calculated from first principles, but
>the market will tell you what the price should be, no trouble at all.
I agree that government price-fixing is doomed to fail due to the complexity
of the economy.
But, think about how the market works. It is like a system of nonlinear
simultaneous equations -- it determines the "correct" price for item X,
based on the prices for items Y, Z, etc.; and based on the culture of
the society in questions (which determines the average, variance, etc.
of the psychology of the individuals in the society).
We all know that a system of nonlinear simultaneous equations can have
MORE THAN ONE SOLUTION. The market finds ONE OF THEM -- which is better
than state price-fixing does. But I do not believe that the price-level
attractor found by a market is necessarily "good" just because it is a
moderately wide-basined attractor of some dynamical system in price
space.
Economic theory is just now emerging from a century or more of linear
thinking. If we accept that the economy is best modeled as a nonlinear
system (a complex system) then we have to accept that there may be
MANY DIFFERENT SOLUTIONS to problems such as
-- pricing a given collection of goods in a given society
-- organizing a society to as to maximize productivity,
opportunity, standard of living [fill in your favorite
goals here]
And we have to ask: are the solutions that happen to get converged to
necessarily the BEST ones? To assume that they are, which seems to be
the line of John Clark and some others on this listserver, is just a
variation on Pangloss with his "This is the best of all possible worlds."
What you are saying is "In a complex system, whatever attractor we happen
to sink into most often is the best one." WHY? WHY? WHY?
ben g