From: carl@SOL1.GPS.CALTECH.EDU (Carl J Lydick)
Subject: Re: What is Market Efficiency.  was Re: ZERO Nuclear impact (was: Is car pooling for real? etc)
Reply-To: carl@SOL1.GPS.CALTECH.EDU
Organization: HST Wide Field/Planetary Camera
Date: Thu, 30 Jul 1992 05:45:12 GMT

In article <1992Jul28.234406.2637@murdoch.acc.Virginia.EDU>, crb7q@kelvin.seas.Virginia.EDU (Cameron Randale Bass) writes:
>In article <1992Jul28.203807.18704@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.

Or you might want to reread what he said a bit more carefully.  Economic
efficiency includes both market efficiency and efficiency of production. 
Michael referred specifically to the MARKET part.
	
>>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.

I'm afraid that it wouldn't do any good since you ignore the term "market" even
though Michael took the trouble to capitalize it.
--------------------------------------------------------------------------------
Carl J Lydick | INTERnet: CARL@SOL1.GPS.CALTECH.EDU | NSI/HEPnet: SOL1::CARL

Disclaimer:  Hey, I understand VAXen and VMS.  That's what I get paid for.  My
understanding of astronomy is purely at the amateur level (or below).  So
unless what I'm saying is directly related to VAX/VMS, don't hold me or my
organization responsible for it.  If it IS related to VAX/VMS, you can try to
hold me responsible for it, but my organization had nothing to do with it.
Xref: sparky sci.environment:10374 sci.physics:12109