Murray N. Rothbarrd:The market is always tending quickly toward its equilibrium position...
Under what Austrian assumptions does he know that all markets move quickly toward equilibrium?
Making a sweeping generalization about markets like that seems to, I don't know, require data. But hey, I can also acknowledge the possibility that I am ignorant on how Austrians defend that idea praxeologically.
(I really don't mean to be critical with this; I just want to understand how--without econometrics or so much as an equation--Rothbard can assert that markets "always" move toward equilibrium "quickly." Maybe I've even reading too much into it, but I am trying to understand Austrianism, from scratch, much better.)
"I'm not a fan of Murray Rothbard." -- David D. Friedman
StrangeLoop:The market is always tending quickly toward its equilibrium position........Making a sweeping generalization about markets like that seems to, I don't know, require data. But hey, I can also acknowledge the possibility that I am ignorant on how Austrians defend that idea praxeologically.
There is no praxeological defense for this. It is a value judgement. But you're taking it too literally in this instance. He probably wants to convey the incentives inherent in the system to align production with the wishes of consumers without delay, and that stalling and delay means profit opportunities forgone, as oppose to "quickly".
Technically, you are correct. Rothbard (like Mises) was human. He should have said "without delay"
Thanks. That makes sense to me.
I think he actually gives some arguments for that in his analysis of suply and demand in MES. I can't check it right now, will look tomorow.
It would have been a bit more helpful if you cited which page of MES you're quoting from. Nevertheless, I had a quick search, and correct me if I'm wrong, but I reckon you're referring to pg 143 of his section on Direct Exchange.
This is helpful, because it helps us establish the kind of "equilbrium" we're talking about. Hence what he's talking about is the establishment of the "plain state of rest," and hence the establishment of the market clearing price(RB calls it equilibrium price, but in my opinion that word should be used more sparingly) at which goods willingly supplied=goods willingly demanded, or as close as possible given the discreteness of Bohm Bawerk's price theory(note also, when we trivially generalise Bohm Bawerk's auction pricing theorem which RB illustrates a litttle earlier in the section, we see that to use Wicksteed's terminology, these "equilibrium" prices are always between the reservation prices of the marginal possessor and non-possessor).
In a sense you are correct, and you'll actually find in this chapter RB would agree with you in the sense that of course we can't know apodictically that any given price at which a good is bought and sold on the market will be THE final price at which the market clears. But we can express qualitatively why there is a strong tendency, especially on developed markets where market actors tend to become more accustomed to market conditions, following not only from the fact that each actor tries to buy at the lowest possible price(and conversely and equivalently sell at the highest possible price) and will tend to withold trade when he is aware of a better offer, bringing about the competition between buyers and sellers, establishing the eventual clearing price between the marginal seller and buyer. Furthermore, as RB describes, speculation, by both buyers, sellers and even outsiders only tends to speed up this process, as shortfalls and surpluses given incorrect bids, tend to reveal in the short run reveal mismatches in market supply and demand which market actors must then respond to. Hence we are given an illustration of how the market process actually "generates" information(note how this entire coordination takes place even despite of imperfect information, contrary to perfect competition based Neoclassical equilibrium theory). It is true we cannot quantify this tendency a priori, but I hope I've managed to give some impression as to why the treatment of this as a strong tendency, can be considered reasonable.
Of course, to re-emphasise what is correct in your objection, individual trades may take place beyond the zone defined by the reservation prices of the marginal seller and buyer(more generally and specifically, the marginal possessor and marginal nonpossessor). But note also even in this case, perhaps when the most capable buyer is "ripped off" by a seller at a price far exceeding the reservation prices of al the other sellers, and inspite of the tendencies of both the other sellers to provide better information to the imperfectly informed buyer, his own interest to seek out a beter deal, as well as the interest of speculators to profit by correctly speculating prices between trading periods; the sale having been made, along with all other non-equilibrium price sales still narow the zone, toward the establishment of the equilibrium price as the "final" market clearing price, since remaining buyers will only be willing to buy for less than the original buyer, and sellers will still be wiling to sell lower than the earlier transitory price.
That's my 2 cents anyway, hope it helped, perhaps others will correct me.
"When the King is far the people are happy." Chinese proverb
For Alexander Zinoviev and the free market there is a shared delight:
"Where there are problems there is life."