Friday, December 9, 2016

Real Markets can not be trusted to generate optimal relative prices

We are faithful market price worshipers
Faith healers all
If we believe market price dynamics will repair market generated wounds

Start with the forex markets and  our willingness
To let them cast their lightening bolts  on domestic employments

We act as if the imperfections in price dynamics are rapidly minimized
As if the markets generate solid second best or possible best price arrays

In reality no set of actual transaction prices in any market display dynamic paths
Close to optimal
Intervention can always improve the welfare outcomes once an adequately broad
"field of welfare impacts " is scrutinized

The optimal wind down of that Indiana carrier plant

Laissez faire actions by corporate CEOs
 Leave out huge loses to the community

Easy guess
 the welfare aggregate would be higher
if the plant remained in operation
until fully automated or fully obsoleted or
It's possible products even with modifications has no domestic market

Joe and his posse member Arnott have a model for fully insured firms
That out performs financial autarkic firm systems

That's an obvious metaphor here

However close and compensate ie insurance system
Might be bettered by a stay open with subsidy system

Where we haven't yet designed the right set of environments and rules for firms of course
This system might be worse then simple close and compensate
We must await
Plans mart gosplans await the projects of even better micro structures and institutions