Suzanne Vega – Luka

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I is for INFORMATION Asymmetry (The A2Z of Economics 9/26)

It's the Market, Stupid!

I: INFORMATION ASYMMETRY

MUNNA Good Morning Mumbaaiiiiiii…. lets help you solve some information asymmetry problems.


WHAT

What we don’t know is what usually gets us killed. – Peter Littlefinger Baelish, Game of Thrones 

Information, in economics, is a vital commodity. The market system that is at the heart of any economic analysis works only when there is typically a free and transparent flow of information. Unsurprisingly, there has been a lot of research on the role information plays in economies and markets. And interestingly, economists have been more worried about situations where there is asymmetric or imperfect information. That is, when the counterparties to any economic transaction do not have exactly the same information. Such situations lead to what is called in economic parlance as ‘market failure’. And markets with imperfect information are dangerous because they can harm both buyers or sellers.

We have often heard the phrase ‘If life gives…

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X is for X-EFFICIENCY (The A2Z of Economics 24/26)

It's the Market, Stupid!

X: X-EFFICIENCY

XEFF


WHAT

In the 1960s Harvey Leibenstein [keen eyed readers may remember him from the bandwagon effect post] was teaching at Berkeley. He had a graduate student as an assistant and it struck him that the student’s effort and performance varied considerably from week to week. Leibenstein, an economist, who had been researching about efficiency had a bit of an epiphany from this experience. He realized that the student’s motivation and efforts were variable and classical economic theory does not usually assume that happens with rational agents. His point, which he made in his paper, Allocative efficiency vs x-efficiency, was that due to lack of motivation and competition, or poorly designed incentives, firms or individuals may not always look to make the most efficient use of their resources.

The sources of such inefficiency could be many he said, including motivation and incentives, but he coined the X-efficiency to…

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Western Civility Not Left-Wing Savagery

Green Jihad

The Left’s origins were a reaction to the Enlightenment, in which the fountainhead of their movement is Jean-Jacques Rousseau. The Left is fundamentally opposed to rationality as evidenced by their hostility to science, technology and, civilization. Instead they teach that primitive cultures (i.e. the barbaric or savage) are the ideal human condition. Regardless if it is their National Socialist cousins of the late 1930s or present-day environmentalist terrorists, Leftists have always harbored affections for mass movements based on barbarism and savagery.

The progress achieved by Western Civilization is the legacy of our embracing the ideas of the Renaissance and the Enlightenment (a.k.s. the Age of Reason). Parts of the world that expressly dismiss or are not influenced by rational, Western thought tend to be Third World or so-called developing countries. Consequently, Leftists seek to bolster and defend Third Worlder feelings and even their cultural manners in which they bristle at…

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