Friday, August 7, 2020

Are there forces in the economy/

Invisible hand

Adam Smith proposed a version of this but it now has a meaning all by it self. It is that compulsion in use that always looks to the optimum trade. Optimum in what sense? T he customer line is never greater than three. The clerks lined up are never greater than two. This condition makes the money equation work.
money supply × velocity of money = price level × real GDP.
Velocity is he approximate flow of transactions. time total money. And rel GDP is the item count times average price level gives total money transactions in related units, the two are equal.

What is the connection? Customers and suppliers and profit shave the same conserved liquidity as best we can determine. So all three are equally likely to be equally late in transition. The hidden hand is this Markov condition. It means the firm is fair traded, and good ordered by within separable subsets. If I keep my queues at the proper ratio then I can add up inventory, (integrate), on some integrate ordered path. and remain a bounded random process. Meaning, if more customers show up the store can produce sufficient clerks to keep the lines from exceeding three.

Stigllitz would say the hidden hand is not always there, and would want government intervention. But government obviously has the same queuing constraints. We will always migrate to the no hedge position, in government or firms; that means liquidity is conserved.

The invisible hand is always there.

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