From: crb7q@kelvin.seas.Virginia.EDU (Cameron Randale Bass)
Subject: Re: What is Market Efficiency.  was Re: ZERO Nuclear impact (was: Is car pooling for real? etc)
Organization: University of Virginia
Date: Tue, 28 Jul 1992 23:44:06 GMT

In article <1992Jul28.203807.18704@michael.apple.com> ems@michael.apple.com (E. Michael Smith) writes:
>In article <1992Jul28.040142.3359@murdoch.acc.Virginia.EDU> crb7q@kelvin.seas.Virginia.EDU (Cameron Randale Bass) writes:
>>In article <1992Jul27.205956.14972@michael.apple.com> ems@michael.apple.com (E. Michael Smith) writes:
>
>>>Market efficiciency has nothing to do with production.  
>
>Re-read that.  Twice.  NOTHING to do with PRODUCTION.  It has everything
>to do with THE MARKET (i.e. the point where things are BOUGHT and SOLD.)
>
>MARKET efficiency just asks how effective the market is at communicating
>REAL product differences and avoiding MONOPOLY PRICING.

      Unfortunately all my econ texts are boxed, but:

     "Economic efficiency: the use of resources that generate the
      highest possible value of output as determined in a market 
      economy by consumers"  Economics Today: The Micro View
      Fourth Edition, Roger Miller

     "We will claim that the primary goal of our economic system,
      the most important and basic task which a system must accomplish
      if it is to be a 'good' system, is the (italics his) EFFICIENT 
      PRODUCTION AND DISTRIBUTION OF THE RIGHT KINDS OF GOODS.  The 
      people of a society are served best if their economic system
      uses social resources in the most efficient way as to satisfy the
      demands of the consumers.  We shall label (italics his) EFFICIENT
      a system which performs in this way"  The Market System, Fourth
      Edition, Robert Haveman and Kenyon Knopf.

      You might want to write Drs Miller, Haveman and Knopf so that they
      will not make such a mistake in their respective fifth editions.

>It isn't strange at all.  You are continuing to confound MARKET efficiency
>with PRODUCTION or DISTRIBUTION efficiency.  It has nothing to do with
>government subsidy of production or taxation.  It has nothing to do
>with the inherent safety of a product.  It has everything to do with
>a vendor pricing that product higher than they otherwise could if the
>purchaser had more perfect knowledge of the alternatives and costs.
>(i.e. if advertizing wasn't creating bogus perceptions.)

     Strange that I'd do that since, according to you, efficiency has nothing
     to do with production or distribution.  I again suggest writing
     the authors above so that people like me will not be further misled.
     Have them differentiate between the different types of economic
     efficiency more carefully.

>In an efficient market, the mother would take the 'free' breast milk
>(that is also much more healthful) over the expensive formula that
>has to be mixed with (non-sterile, dirty ) water (since she has no
>money for fuel to sterilize the water...).

     Just as an aside, this is hogwash.  There are many very good
     sociological, health and economic reasons to use formula.  An
     'efficient market' in either your or my sense does not dictate
     that mothers always use breast milk.

     [stuff deleted because responding has become tiring]

     If you are going to insist on your definitions, please include
     references so that we can be on the same page.

                             dale bass
--
C. R. Bass                                           crb7q@virginia.edu
Department of Mechanical and Aerospace Engineering
University of Virginia
Charlottesville, Virginia                            (804) 924-7926
Newsgroups: sci.environment,sci.physics,sci.energy