Sorry for the typos and such, I will revisit this later.
I will mainly focus here on the market system as I am geared towards becoming fluent in the market system. I have some lived experience of the command system though I was small back then and these are mostly fond memories
From the positive point of view, the market system has the feature that it has systemic inefficiencies which can be pin pointed, and this is whenever normative position is entertained.
Characteristics of the market system are:
- private property - that either 'land', 'labour, 'capital' or 'entrepreneurial activity' is always assigned to some one entity
- freedom of enterprise and choice
-- that those entities can arrange their private property in combinations as they see fit
-- that those entities can make free choices under conditions of scarcity
- self-interest - that it is a western world type of model where self is at the centre and not something else.
- competition - that because of freedom of choice to enter or exit exchange and some other market conditions (e.g. many agents, similar goods and there was a fourth one that I don't remember), whatever one finds useful, there will be many offering it in exchange for what they find useful from the one. If the former is the 'buyer' and latter 'sellers', then 'sellers' will undercut each other for what they want in return for the stuff they have, with the limit being the point where 'marginal gain' and 'marginal cost' (from chapter 1) are equal.
- market and prices - this happens in the market environment. In the book there is the example of 'prices' everywhere and 'ceteris paribus'. Equally, you could think about the currency being 'fashion / popularity' and then 'price / money' would be in the 'ceteris paribus'. Ultimately for those familiar with regression analysis, all these factors could be included in such analysis where an assumed 'utility' demand schedule would be displayed.
- technology and capital goods - climbing up the ladder of complexity and leverage as per
Meadows on Leverage Points
- specialization and resulting division of labour (also geographic specialization) - this builds on CCCCCC and comparative advantage
- use of money - it is perhaps risky and potentially contentious but I would think of using money in 'barter' terms, I would not give money that much of a special status. On a spectrum, it is more liquid and less useful other than a medium of exchange. It has some uses, store of value being one. Persuasive power as it moves the FIRE movement. You have to pay taxes in it. measuring stick to compare with the johnses. I am not particularly attached to these views and open to debate this.
- active but limited government - to fix normative (AQAL 'left') 'market failures'. Consequently there are (AQAL 'right') 'government failures.
Five fundamental questions are:
- what will be produced - whatever agents choose to bring most utility compared to other opportunities.
- how will the goods and services be produced - in a way that optimizes for opportunity cost of not producing and keeping status quo / doing something else.
- who will get the output - those who offer utility at the margin in the market exchange.
- how will the system accommodate change - change of the overall utility of a good; less / more of it will be available on the exchange
- how will the system promote progress - through know-how and more stuff. ERE is excellent at promoting progress through know-how.
The Circular Flow Model:
- household is presented as a unit that outputs raw ingredients (land, labour and entrepreneurial ability) or capital (if they own it, so there's a feedback loop here) in exchange for a medium of exchange (here money) and in turn exchanges the medium for the above again. Come to think of it, businesses are not much different, barring some legal differences.
- I would see 'consumer goods' from the 'product market' as an 'overhead' for running a household, much like there is an 'overhead' to running a business. Thus the 'product market' is the 'resource market' for households. In my view, this could be reduced to any two entities exchanging in market conditions.
How the market system deals with risk:
- is about how to manage the fact that due to (un)known (un)knowns I might get less utility in exchange for more utility.
- often agents lock in and externalize risk, this is done by getting a salaried job contract, relying on state pension, buying annuity or generally getting insured. The risk is still there, but externalized. It feels better to many. Those who like looking under the hood can build a DIY hedge system, this is ERE or 'competent man'.