Trading Equilibrium

The Author would like to thank Arnold Kling for the pointer to:

VALUE AND EXCHANGE
Meir Kohn
(http://www.cato.org/pubs/journal/cj24n3-8.pdf )

The basic thesis of the Work asserts that the 'value paradigm' demands a ideal state which cannot exist because a real 'trading equilibrium' could not exist:

"trading equilibrium"—a situation in which all opportunities
for mutually advantageous exchange are being realized.

The assumption that price information is all that is needed
is essentially equivalent to assuming that exchange is free of problems
and therefore costless. There are no problems with the quality of
goods and there are no problems assuring future performance
when this is required

The real problem for the 'exchange paradigm' comes from the fact that a trading equilibrium does exist at any point in time based upon Trading partners' basic vote in Currency exchange for Product. This exchange can be 'efficient' or 'inefficient'. Kohn's dismissal of Hybrid theory therefore carries error within it.

Both the value paradigm and exchange paradigm accept 'Maximization' as a given axiom, which is a foolhardy notion at best; any statistical estimate criterea would find at least 90% of all Market Participants to be acting irrationally at all times. Market Participants do act upon preconceived plans(aka exchange paradigm), but they are Price-takers(aka value paradigm). They are willing to accept Prices even when irrational, in order to avoid Plan change.

Government does set at efficiency ideal (value paradigm) in that it sets Currency standards, and enforces prohibition of Fraud. Government, on the other hand, can interfere with Market performance (aka exchange paradigm) through adversive Taxation, Regulation, and purchase of excess materials and Products. There is a Case for Government intervention in the Market, and for limitation of Government interference in the Market.

Economic theory must accomodate both the value paradigm and the exchange paradigm. Both must take another look at Maximization, and at the power of the 'Invisible Hand'. The First is rarely utilized in practice in favor of business stability of practice, and the Later turned malignant in tone without turning the Government into a Umpire. lgl