Thursday, December 01, 2011

Markets are Visibly Run by Visible Prices

SeekingAlpa, and investment advice blog asks readers, Solar Stocks: by or sell? HERE

“We have long been advocates of a market economy and believe that the “invisible hand” of the market should for the most part be allowed to allocate capital and resources without undue government influence.

Markets operate by price signals all along the supply chain, any part of which can change its price at any time to which other links in supply chain adjust.

There is no “invisible hand” “allocating capital and resources”, with or without “government influence”; there is no secret force at work (it would have to be active in all markets across the globe) manipulating every transaction for some unknown entity towards some “unfathomable” end. Government run economies (aka communism) that suppress markets failed in the experiments with them conducted in the 20th century.

The myth of the invisible hand is better left to the science of astrology or some such mumbo jumbo, but the illusion that there is an invisible hand, implying that only experts, like ‘seeking alpha’, are in the ‘know’ to advise the placing of bets – for a fee - is the oldest con trick since chariot races made Ben Hur famous, and created a job for life (aka tenure) for otherwise out-of-work mathematicians, many of whom migrated into economics, claiming to make it a hard science.

More important, Adam Smith, despite what is claimed, never said that there was such a mystic force at work on the billions of very visible prices interacting each second in very real world global markets. Nor is there any such a term for ‘an invisible hand’ in the mathematical equations alleged to be necessary to show how markets work.



Blogger michael webster said...

The original market for security prices in the US had required collusion on brokerage fees - otherwise the market unraveled as too little product was brought to the auction.

2:30 am  

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