Monday, April 11, 2011

CHAPTER 12: For those who are interested in more detail there are textbook explanations of elasticity, utility maximizing consumer behavior, profit maximizing business behavior, and other topics.  None of this is necessary to understand how an economic system organizes itself spontaneously.  You have already learned enough to understand this important concept.  We tend to take this marvelous system for granted because it usually works smoothly but like the human body do not mistake smooth for simple. 

One of the mistakes of mainstream economics is to divide the study of economics into macro and micro components exclusively.  What is therefore excluded is the macro-micro connection which is how the individual parts work together in a coordinated and integrated fashion.  In other words, the study of spontaneous order. 

Of course planners have superimposed a partial hierarchy on the otherwise self organizing parts of the system.   So next we need to study the methods and consequences of such policies.. 

Review Questions:  Isn't macro just a large number of micro events?  Does spontaneous order have a macro and a micro component?

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