Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.3 4.3bsd-beta 6/6/85; site topaz.RUTGERS.EDU Path: utzoo!linus!philabs!cmcl2!seismo!caip!topaz!josh From: josh@topaz.RUTGERS.EDU (J Storrs Hall) Newsgroups: net.politics.theory Subject: Re: The free market Message-ID: <4126@topaz.RUTGERS.EDU> Date: Mon, 28-Oct-85 21:00:01 EST Article-I.D.: topaz.4126 Posted: Mon Oct 28 21:00:01 1985 Date-Received: Fri, 1-Nov-85 00:36:05 EST References: <225@gargoyle.UUCP> Reply-To: josh@topaz.UUCP (J Storrs Hall) Distribution: net Organization: Rutgers Univ., New Brunswick, N.J. Lines: 41 In article <225@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: >I reproduce T. Schelling's remarks about it in *Micromotives and >Macrobehavior*[:] >[The point] is to show that one cannot simply add up individual decisions >and assume the total to be a simple sum of the decisions; at some >threshold the aggregate consequences may negate the individual's >intentions... So what else is new? "[Every individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. [H]e intends only his own security; and by directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." --from "An Inquiry into the Nature and Causes of the Wealth of Nations", by Adam Smith, 1776 > >"[Akerlof] argued that the seller of a used car knows whether or not >it is a lemon; the buyer has to play the averages... You have yet to show that there is any reason to suspect that the buyer has any better knowlege of the average value of used cars than of the value of the specific one he is looking at. This is a common collectivist aggregate fallacy: Would you have us believe that the buyer has taken each car for sale, determined its value, added the values and divided by the number of cars, and is then unable to remember which value corresponded to the car he's looking at? How else is he to know the "average" value? Study some operations research--you'll quickly find that merely taking the middle value of the possible range of values of a variable is usually *not* the right thing to do. In particular, a buyer's best estimate of the value of the car in front of him comes not from a mythical "average", but from a physical inspection of the actual hunk of metal. --JoSH