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To: E. Charters who wrote (86354)	6/4/2002 8:13:59 AM
From: Don Lloyd	Respond to of 116762

E.C. - <<"Since there are a large number of significant and unmeasurable factors that affect the purchasing power of money, it is completely futile to suppose that it can be stabilised better than the free market dynamically adjusts. Nor is it desirable as the attempts produce both undesired side effects and instability.">> i. Justify and expand upon this statement, if you agree with it, with reference to the theories of Keynes or Galbraith, - and Adam Smith. How does this statement agree with Veblen's theory that free markets are the principle component that supplies surplus capital, thus creating the economic basis for a "leisure class"? The theories of Keynes, Galbraith, and in some ways Smith, bear the same relationship to the social science of economics as studying the shapes of animals and clowns found in clouds bear to meteorology. All of economics is the result of the purposeful choices and actions of individuals. In a free market economy, the function of money is to enable the exponential increase in the range of possible mutually beneficial exchanges that are possible when direct exchange becomes indirect exchange. This results in a high level of highly distributed prosperity when left largely free of state intervention except for the protection of person and property. ii. In the reference above, is the principle of marginal utility necessary to consider to allow the market to adjust to conditions of change in supply? In other words, if their is a time lag in the "invisible hand" of market correction, due to percieved oversupply of goods, will perceptions of the utility of goods change their worth? All economic values are subjective and are reduced through application of the law of diminishing marginal utility as quantities increase. All goods are supplied as a result of entrepreneurial forecast and are always subject to error. An excess of error results in a former entrepreneur. Corrections are always going on and any time lags depend on the length of the production cycle of a given product. Regards, Don