Completely untrue

 

Matthew Yglesias

@mattyglesias

·

16h

If everyone has the same amount of money, then prices allocate resources efficiently. If there’s wild inequality, then prices allocate resources to rich people.

I wonder if an economist told him this?

This will make the DSGE models work efficiently.  This is the Godot model of the spiritual master making us all equally informed.  In is the single node solution to the Markov 2 tuples.   

In the asymmetric case, where uncertainty moves about, allocating resources is still efficient.  Just as efficient. In fact more efficient.  The real system, Markov 3 triples, are more efficient because they do not carry the cost of Godot. We just update the map as needed, thus eliminating a bunch of central planning jobs.

This misunderstanding would cause someone to mistakenly call for larger N, like a billion agents in the economy. They would be mistaken, they might even write a misleading book or promote a misleading theory about government debt.   The illusion comes from the simplicity of the formula when N is large, then we can pretend to Newton's Grammar.  This bad assumption is the fundamental blunder of economics, the basis of the Lucas critique.