Hi Markus,

I agree that, empirically, market-based mechanisms tend to be the 
socially optimal solution to most real-world resource allocation 
problems.  However, this isn't really what is demonstrated in most 
introductory microeconomics textbooks, which focus on the analysis of 
systems in equilibrium. 

As is well known -- 
http://en.wikipedia.org/wiki/Theory_of_the_Second_Best -- once you're 
outside of equilibrium there is no particular reason why market-based 
mechanisms should result in social welfare improvements.  Producing a 
product that creates pollution (which is a form of market failure) is 
the classic example, making the manufacturing process more competitive 
might result in a net social loss if increased production results in 
increased pollution, but the problem is far broader than that.

I think what Jane St is doing is great and I've made my career in 
finance, but arguing that you're doing it to save the world doesn't seem 
like good chess.  At least I hope you don't actually believe that or 
you'll have to change the name to St Jane St :-)

Cheers,
Lawrence

PS Thanks for LACAML, very social welfare improving!


Markus Mottl wrote:
> 2009/3/16 Yaron Minsky <yminsky@gmail.com>:
>   
>> I would humbly propose that this thread has now gotten deeply off-topic, and
>> perhaps discussion on the list should turn back to programming languages,
>> rather than to deep philosophical questions about the nature of the
>> financial markets.
>>     
>
> I'd also rather keep this thread off the list now and will only reply
> off the list in the future if it seems reasonable.  This thread has
> become way too political for my taste.
>
> As someone else here has already suggested, I encourage everyone that
> wishes to learn more about different models of economy to pick up any
> reputable, introductory textbook on microeconomics.  It will teach you
> that markets, by and large, work well, that they can sometimes fail,
> can also fail systematically in certain areas, and that it is
> extremely hard to find good solutions for the latter that do not cause
> more problems than they solve.  Ideological quick fixes do not exist,
> just as the optimal type sytem doesn't so no more flames please...
>
> Regards,
> Markus
>
>