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To: Fiscally Conservative who wrote (34198)	7/26/2005 12:59:16 AM
From: gpowell	Read Replies (1) \| Respond to of 116555

All of this,of course,assumes a certain criteria for a 'time duration metrics'. Does it? Were talking about the market mechanisms that balance entrepreneur’s plans with consumer’s intertemporal consumption preferences. That mechanism is the relative price between inputs and outputs – keeping in mind that any particular input can be combined and/or applied at different points in the structure of production to produce different outputs. Each of these input/output relationships define a particular own rate of return. As consumption patterns shift (in goods and time), the optimal rates of return among the various (and potential) inputs/outputs will undoubtedly shift. Thus, the savings and consumption patterns of consumers signal entrepreneurs to maintain, consume, or create instances of capital, which thereby shifts the timing and composition of the output produced. The preceding illustrates the mechanism by which the market moves towards equilibrium, the article I was responding too assumed the market provided no such equilibrating mechanism and that therefore government was necessary to a smooth operating market. To elaborate further, the signals the market produces are dispersed and the knowledge required to respond is itself also dispersed and largely tacit. No central authority could ever know the time preference, the highest utility producing outputs, or the multitude of different outputs capable of being produced from a set of inputs. However, the implication of fragmented and dispersed knowledge is that markets will fluctuate on a path of increasing wealth, assuming wealth is defined as the accumulation of knowledge and past human effort. The length of time for each "implied future variable" can not be accurately estimated in a truely free economic landscape(one absent of Governmental intervention;a monetary authority.) Hence,the effect of which can have long lasting effects. Any cause/effect relationship can not be predicated on outcome without a true set of controls. You’re saying that even though the market provides a mechanism for equilibration, that government is needed to smooth out the inevitable fluctuations? Your implying that absent of government these fluctuations will be large in amplitude and long lasting. I would agree, government could do a better job than the market assuming it had perfect knowledge and foresight. Unfortunately that isn’t reality. Historically, the longest lasting and largest fluctuations have arisen from government control.