Competitive equilibrium (excerpt from Economics in Two Lessons)

by John Q on July 18, 2015

I’m now coming up to (what I hope will be) the most challenging part of my book-in-progress, Economics in Two Lessons. The core theoretical point the first part of the book (Lesson 1) is that, under a set of ideal assumptions, competitive equilibrium prices both reflect and determine the opportunity costs faced by consumers and produces. This means that there is no way to rearrange consumption to make someone better off unless someone else is made worse off. (I’ve already mentioned my reasons for avoiding the term “Pareto-optimal” in this context.

What I’m trying to do here is to spell out the logic underlying these results in a way that foreshadows the discussion of market failure and income distribution, in Lesson 2, but still shows the power of market mechanisms. I’ll probably need a few goes at this, and this is my first try. Critical comments on everything from the underlying theory to editorial nitpicks are welcome. Sincere praise is also welcome of course, but constructive criticism is best of all.
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Where is this going, someone tell me?

by John Holbo on July 18, 2015

The neocons have been wailing and gnashing teeth over the abysmal awfulness of the Iran deal. Meanwhile, everyone else says it’s good or, at worst, better than the alternatives. I am a creature of irony so it is hard for me to discuss the situation rationally. I would like to mock the neocons but what is the irony? Dog chases car. Dog catches car. What’s a dog to do? Bite it! So this is dog-bites-car. That’s just neocon nature.

But here’s something a bit ironic, so I’ll pass it on. The most eloquent, pithy assessment I have read on the subject is from Pat Buchanan, gaming out GOP rejection: [click to continue…]