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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