Comments on: Unexpected market instability!!! http://stephenmonrad.com/blog/economicsidea/unexpected-market-instability/ The blog is about alternative economics and the book I am writing about my economic ideas. Mon, 12 Apr 2010 04:35:30 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: Stephen Monrad http://stephenmonrad.com/blog/economicsidea/unexpected-market-instability/comment-page-1/#comment-3085 Stephen Monrad Tue, 01 Dec 2009 01:41:06 +0000 http://stephenmonrad.com/blog/?p=586#comment-3085 Eric. Good points. The quality issue is perhaps an unavoidable issue. If some people are better at baking, their pies would likely taste better. The problem of matching supply to demand is tricky. I am beginning to think that it all comes down to how markets are constructed. I'm going to have to think about it some more. Eric.

Good points. The quality issue is perhaps an unavoidable issue. If some people are better at baking, their pies would likely taste better.

The problem of matching supply to demand is tricky. I am beginning to think that it all comes down to how markets are constructed. I’m going to have to think about it some more.

]]> By: Eric Monrad http://stephenmonrad.com/blog/economicsidea/unexpected-market-instability/comment-page-1/#comment-3072 Eric Monrad Fri, 27 Nov 2009 05:15:05 +0000 http://stephenmonrad.com/blog/?p=586#comment-3072 I know you're trying to keep it simple, but I've got two more complexities: effort and quality. Can we assume that bakers can produce 50% more pies if they work 50% more hours? This would mess up the 1/3, 2/3 split. We can probably leave quality aside for now, but what if some pies were tastier than others? They might have higher value, or at least be sure to get sold. Regarding the imbalances, I'm not sure why you immediately assume there will be stampedes and farmers "tripping over each other" to lower prices. The problem would be that no farmer would want to be the last one standing with no one to sell to. There's a risk. But why would they all cut their prices drastically if the risk was low? Also, the excess production might be spread out over all the farmers. That is, a 5% surplus might mean a 5% reduction to all farmers rather that 5% of the farmers getting zero. Two mechanisms to fix the surplus would be overtime or flexible workers. If bakers could work overtime (or farmers not work full years), the system would balance. Alternatively, if some portion of the population could both farm and bake, perhaps less efficiently, they could profit from the imbalances. I know you’re trying to keep it simple, but I’ve got two more complexities: effort and quality. Can we assume that bakers can produce 50% more pies if they work 50% more hours? This would mess up the 1/3, 2/3 split. We can probably leave quality aside for now, but what if some pies were tastier than others? They might have higher value, or at least be sure to get sold.

Regarding the imbalances, I’m not sure why you immediately assume there will be stampedes and farmers “tripping over each other” to lower prices. The problem would be that no farmer would want to be the last one standing with no one to sell to. There’s a risk. But why would they all cut their prices drastically if the risk was low? Also, the excess production might be spread out over all the farmers. That is, a 5% surplus might mean a 5% reduction to all farmers rather that 5% of the farmers getting zero.

Two mechanisms to fix the surplus would be overtime or flexible workers. If bakers could work overtime (or farmers not work full years), the system would balance. Alternatively, if some portion of the population could both farm and bake, perhaps less efficiently, they could profit from the imbalances.

]]>