Invisible Hands, was Re: Multihoming sites and ARIN

Kent Crispin kent at SONGBIRD.COM
Fri Feb 21 19:07:10 EST 1997


Scott Huddle allegedly said:
[...]
> 
> -scott
> 
> Some casual background, this is Econ 101
> 
> The Demand Curve,
> 	o	changes in price move you along the curve (at a high
> 			price, low demand, at low price high demand)
> 	o	changes in aggregate demand shift the curve
> 
> $ |
>   |\     \
>   | \  -> \
>   |  \     \
>   |   \     \
>    -------------
>         Q
> 
> The Supply Curve, 
> 	o	changes in price move you along the curve (at a high
> 			price, high supply, at low price low supply)
> 	o	innovations in technology shift the curve right
> 
> $|     /     /
>  |    /     /
>  |   / ->  /
>  |  /     /  
>  | /     /
>   -------------
>         Q
> 
> The Great Truth
> 	o	The "invisible hand" of a competitive market will find 
> 			an equilibrium point, where supply *exactly* equals 
> 			demand at some price, P
> 			(at any other point, Evil Greedy Bastards arbitrage
> 			 to exploit market inequalities and move to
> 			 the equilibrium)
> 
> $ |     /  
>   |\   /     
>   | \ / 
> P |  *       
>   | / \    
>    -------------
>         Q
> 
> -------------

Yes, this is econ 101, and of course is too simple-minded to be of 
much use in this discussion.  Fundamentally, it makes assumptions 
about the rate of change of supply/demand that may or may not be 
warranted in a real-world case.  In particular, if exogenous factors 
have significant effects in the same time frame as the rate of 
convergence towards equilibrium, there is no convergence, and, 
mathematically, you have chaos.  And in any real-world market, there 
are exogenous factors.

Generalizing from tautologies to reality is a common fallacy: "a=a,
therefore capitalism". 

-- 
Kent Crispin				"No reason to get excited",
kent at songbird.com,kc at llnl.gov		the thief he kindly spoke...
PGP fingerprint:   5A 16 DA 04 31 33 40 1E  87 DA 29 02 97 A3 46 2F



More information about the Naipr mailing list