WEBVTT NOTE Equilibrium Constructs In the Price Theories of Menger and Böhm-Bawerk 1 00:00:00.000 --> 00:00:03.480 Both the prominent traditions in neoclassical, 2 00:00:03.480 --> 00:00:05.160 that comprise the neoclassical mainstream, 3 00:00:05.160 --> 00:00:09.240 that is the Walrasian as well as the Marshallian tradition 4 00:00:09.240 --> 00:00:12.560 have just one conception of equilibrium. 5 00:00:12.560 --> 00:00:15.960 That which Mises called the final state of rest. 6 00:00:15.960 --> 00:00:19.960 So the prices also, which you can call final prices 7 00:00:19.960 --> 00:00:24.960 that prevail in the final state of rest have two properties. 8 00:00:25.200 --> 00:00:28.760 So firstly, they equate the overall quantity demanded 9 00:00:28.760 --> 00:00:33.080 in the market with the overall quantity supplied in the market. 10 00:00:33.080 --> 00:00:36.520 So the law of one price for every good prevails. 11 00:00:36.520 --> 00:00:39.880 But also, more importantly, the underlying valuations, 12 00:00:39.880 --> 00:00:43.080 that is the underlying maximum buying prices 13 00:00:43.080 --> 00:00:47.440 and minimum selling prices of the buyers and sellers 14 00:00:47.440 --> 00:00:50.040 on the market are free of all error. 15 00:00:50.040 --> 00:00:53.320 So the underlying market demand and supply curves 16 00:00:53.320 --> 00:00:56.160 which intersect to give you the final price 17 00:00:56.160 --> 00:00:58.540 are free of all types of error. 18 00:00:58.540 --> 00:01:00.020 and there are two types of error, 19 00:01:00.020 --> 00:01:04.260 the errors in valuation and errors in appraisement. 20 00:01:05.260 --> 00:01:08.220 So what do we mean by errors in valuation? 21 00:01:08.220 --> 00:01:10.760 It's basically that buyers and sellers 22 00:01:10.760 --> 00:01:13.340 do not make any mistake with respect 23 00:01:13.340 --> 00:01:15.620 to the ranking of their ends. 24 00:01:15.620 --> 00:01:18.980 So for example, you don't engage in an exchange, 25 00:01:18.980 --> 00:01:21.360 you don't spend $50 on buying, let's say, 26 00:01:21.360 --> 00:01:24.740 a ticket to a basketball game and then realize 27 00:01:24.740 --> 00:01:26.780 that you made a mistake that you would rather 28 00:01:26.780 --> 00:01:30.620 have not parted with the $50 for the basketball game. 29 00:01:30.620 --> 00:01:33.060 Similarly, a seller, oops, sorry, 30 00:01:33.060 --> 00:01:35.780 a seller could do the opposite, for example, 31 00:01:35.780 --> 00:01:38.600 so he could part with a good, let's say a TV, 32 00:01:38.600 --> 00:01:41.720 on the used goods market for whatever, $100, $200, 33 00:01:41.720 --> 00:01:43.900 but then realize that he had made an error 34 00:01:43.900 --> 00:01:47.420 in his ranking of ends, that he would have preferred 35 00:01:47.420 --> 00:01:51.300 not to give up the TV for that sum of money, 36 00:01:51.300 --> 00:01:52.740 that he had made an error. 37 00:01:52.740 --> 00:01:54.860 But also, more importantly, 38 00:01:54.860 --> 00:01:58.100 that it's also free of errors in appraisement. 39 00:01:58.100 --> 00:02:01.620 So why do buyers and sellers appraise on the market? 40 00:02:01.620 --> 00:02:03.500 Well, because you come into the market 41 00:02:03.500 --> 00:02:06.640 with your underlying valuations of the maximum buying 42 00:02:06.640 --> 00:02:07.940 and minimum selling prices, 43 00:02:07.940 --> 00:02:11.340 which are derived from your ranking of ends, 44 00:02:11.340 --> 00:02:13.700 your marginal, based on marginal utility. 45 00:02:13.700 --> 00:02:16.580 But of course, buyers don't just want to buy, 46 00:02:16.580 --> 00:02:18.940 they want to buy at the lowest price possible 47 00:02:18.940 --> 00:02:22.300 and sellers want to sell at the highest price possible. 48 00:02:22.300 --> 00:02:26.260 and in order to achieve that they appraise 49 00:02:26.260 --> 00:02:30.500 or they try to evaluate the prevailing conditions 50 00:02:30.500 --> 00:02:31.940 in the marketplace. 51 00:02:31.940 --> 00:02:35.440 And of course in the final state of rest 52 00:02:35.440 --> 00:02:37.520 there are no errors of appraisement. 53 00:02:37.520 --> 00:02:40.240 So that means that all buyers and sellers 54 00:02:40.240 --> 00:02:43.180 correctly evaluate the prevailing market conditions 55 00:02:43.180 --> 00:02:47.580 both at the present period but also for future periods. 56 00:02:48.900 --> 00:02:51.000 So what are the conditions which need to prevail 57 00:02:51.000 --> 00:02:53.400 for buyers and sellers to actually engage 58 00:02:53.400 --> 00:02:55.260 in that correct appraisement. 59 00:02:55.260 --> 00:02:57.640 So firstly, there has to be perfect knowledge 60 00:02:57.640 --> 00:03:01.400 of the stock of the good that is available for sale. 61 00:03:01.400 --> 00:03:06.120 So for example, so no seller goes into the marketplace 62 00:03:06.120 --> 00:03:07.940 with a misconception that the stock, 63 00:03:07.940 --> 00:03:10.280 the good he's trying to sell, let's say wheat, 64 00:03:10.280 --> 00:03:12.280 that there was a poor harvest, 65 00:03:12.280 --> 00:03:14.480 and that the stock of wheat is actually half 66 00:03:14.480 --> 00:03:16.600 of what it really is. 67 00:03:16.600 --> 00:03:20.320 So he's willing to accept a different price 68 00:03:20.320 --> 00:03:50.320 and what he would ideally be willing to accept, similarly with the buyers, but also that all buyers and sellers know of each other's existence, and knowing each other's existence, they also can read, you know, have perfect, you know, they can read each other's minds, they can look into each other's minds, they can construct, so each buyer can, or each seller can reconstruct the individual demand curves of every buyer, as well as the individual supply curve of every seller, and that means that each individual 69 00:03:50.320 --> 00:04:14.480 In short, that means basically that each buyer and seller is blessed with perfect information 70 00:04:14.480 --> 00:04:16.440 and perfect foresight. 71 00:04:16.440 --> 00:04:20.480 So they can make a correct assessment of the price that will ideally clear the market. 72 00:04:20.480 --> 00:04:23.820 And so what they do is they readjust their maximum buying prices and minimum selling 73 00:04:23.820 --> 00:04:24.820 prices. 74 00:04:24.820 --> 00:04:31.040 So all the supra-marginal buyers and the marginal buyers reduce their maximum buying price to 75 00:04:31.040 --> 00:04:32.920 that ideal equilibrium price. 76 00:04:32.920 --> 00:04:40.240 Similarly, all the supra-marginal sellers as well as the marginal sellers readjust their 77 00:04:40.240 --> 00:04:45.440 minimum selling prices upwards to the true equilibrium price. 78 00:04:45.440 --> 00:04:51.040 What this means of course is that these assumptions of perfect foresight and perfect information 79 00:04:51.040 --> 00:04:55.220 means that there's no higgling and haggling on the market, there's no room for bargaining 80 00:04:55.220 --> 00:05:01.620 because there's no point in bargaining or because everyone knows the true market conditions 81 00:05:01.620 --> 00:05:08.040 and that also means that there's an instantaneous attainment of the true final state of rest 82 00:05:08.040 --> 00:05:13.760 or final price and of course these assumptions are unrealistic but a lot of Walrase models 83 00:05:13.760 --> 00:05:16.600 do employ these unrealistic assumptions. 84 00:05:16.600 --> 00:05:21.600 In fact, there is quite a broad consensus 85 00:05:21.960 --> 00:05:23.120 in the history of thought literature 86 00:05:23.120 --> 00:05:25.720 that Walras himself, over the many additions 87 00:05:25.720 --> 00:05:29.440 of the elements of pure economics, 88 00:05:29.440 --> 00:05:31.000 ended up making just these assumptions 89 00:05:31.000 --> 00:05:33.960 in both his exchange as well as production models, 90 00:05:33.960 --> 00:05:36.720 largely because he realized that if there's any trade 91 00:05:36.720 --> 00:05:40.880 at non-equilibrium prices that will change 92 00:05:40.880 --> 00:05:46.360 change the underlying data and therefore change the theoretical equilibrium and then the practical 93 00:05:46.360 --> 00:05:51.680 equilibrium that you know the result of the Tat-An-Mont or the grouping in real time will 94 00:05:51.680 --> 00:05:55.680 not attain the theoretical equilibrium price. 95 00:05:55.680 --> 00:05:59.300 Now on the other hand, Marshall and Marshallians, I mean starting with Marshall himself tend 96 00:05:59.300 --> 00:06:01.160 to be a little more realistic. 97 00:06:01.160 --> 00:06:05.640 So they acknowledge that these assumptions are unrealistic, that you know the final state 98 00:06:05.640 --> 00:06:10.200 of rest or final prices are really unattainable on the marketplace, there are always errors 99 00:06:10.200 --> 00:06:15.200 in valuation and errors in appraisement, but what they say is that, well, yeah, so they 100 00:06:15.200 --> 00:06:21.400 acknowledge that you can have trading at what Hicks in value and capital called false prices, 101 00:06:21.400 --> 00:06:27.920 that is prices which are not equilibrium prices in the sense that I've just talked about. 102 00:06:27.920 --> 00:06:32.880 So there is room for higgling and haggling and bargaining, but what they claim is that 103 00:06:32.880 --> 00:06:36.840 at these false prices, market demand is not equal to market supply. 104 00:06:36.840 --> 00:06:43.160 So that means there is market rationing or rationing, but also that basically all the 105 00:06:43.160 --> 00:06:47.760 welfare properties of the free market, that is there is no maximization of consumer and 106 00:06:47.760 --> 00:06:52.880 producer welfare because that is linked only to the equilibrium, the final state of rest 107 00:06:52.880 --> 00:06:53.880 price. 108 00:06:53.880 --> 00:06:58.800 And of course, what they also claim is that even though there is, Marshall claimed this, 109 00:06:58.800 --> 00:07:05.280 he made this assumption of the constant marginal utility of money, that basically any exchanges 110 00:07:05.280 --> 00:07:10.920 is that non-equilibrium prices or these false prices does not in any way affect the movement 111 00:07:10.920 --> 00:07:16.060 of the market towards the final state of rest, which also means basically that the movement 112 00:07:16.060 --> 00:07:19.960 towards the final state of rest takes place in real historical time. 113 00:07:19.960 --> 00:07:24.600 The market tends over time to reach that final state of rest. 114 00:07:24.600 --> 00:07:31.160 So in a sense, the mainstream of both these traditions are caught between the devil of 115 00:07:31.160 --> 00:07:38.680 of Unrealism, because the assumptions that underlie the instantaneous attainment of the 116 00:07:38.680 --> 00:07:44.680 final state of rest, so unrealism, market clearing and welfare maximization go on the 117 00:07:44.680 --> 00:07:51.440 one side, and they're stuck on the other side with realism, which is the Marshallians allowing 118 00:07:51.440 --> 00:07:58.800 for trade at hiddling and haggling, bargaining at non-FSR or final state of rest prices, 119 00:07:58.800 --> 00:08:04.600 are also allowing for rationing and no maximization of welfare. 120 00:08:04.600 --> 00:08:09.500 Of course, the Marshall was criticized and has been criticized by many authors for that 121 00:08:09.500 --> 00:08:14.640 assumption that equilibrium is actually attained, that the market is actually moving in real 122 00:08:14.640 --> 00:08:17.160 historical time towards equilibrium. 123 00:08:17.160 --> 00:08:22.600 Philip Wickstead, for example, said that any trade at disequilibrium prices will necessarily 124 00:08:22.600 --> 00:08:26.720 change the underlying data or the valuations of buyers and sellers and therefore there 125 00:08:26.720 --> 00:08:33.440 There will be a different theoretical equilibrium price, and that's also, I mean, other people 126 00:08:33.440 --> 00:08:39.480 who have criticized Nicholas Caldor have also made the same point. 127 00:08:39.480 --> 00:08:44.160 But as Professor Salerno has pointed out in a number of papers in the 90s and also Professor 128 00:08:44.160 --> 00:08:49.880 Klein recently, there is a different tradition of equilibrium theorizing and what is broadly 129 00:08:49.880 --> 00:08:56.680 called the causal realist tradition, and it finds its most explicit treatment in the work 130 00:08:56.680 --> 00:08:59.720 Works of Ludwig von Mises and Arthur Marquette. 131 00:08:59.720 --> 00:09:04.120 Now both, I mean, Mises and Marquette acknowledge that the final state of rest is a completely 132 00:09:04.120 --> 00:09:06.440 unrealistic and imaginary construction. 133 00:09:06.440 --> 00:09:10.480 It cannot ever be attained, you know, in the real world. 134 00:09:10.480 --> 00:09:14.240 So for example, Mises, these are quotes from Human Action. 135 00:09:14.240 --> 00:09:19.760 He says, the final state of rest is an imaginary construction, not a depiction of reality. 136 00:09:19.760 --> 00:09:22.640 He says the final price is a hypothetical price. 137 00:09:22.640 --> 00:09:26.080 The market prices are historical facts and we're therefore in a position to note them 138 00:09:26.080 --> 00:09:30.960 with numerical exactitude, the final price can only be defined by defining the conditions 139 00:09:30.960 --> 00:09:37.760 required for its emergence. 140 00:09:37.760 --> 00:09:44.720 In this tradition, Mises and Margat, and actually also some economists before, such as Wigstead 141 00:09:44.720 --> 00:09:49.400 and Fetter, they acknowledge that all market prices are not final state of rest prices 142 00:09:49.400 --> 00:09:54.520 in the sense that in the market and at any given point in time, you always have errors 143 00:09:54.520 --> 00:09:57.320 of valuation and errors of appraisement. 144 00:09:57.320 --> 00:10:04.400 The underlying maximum buying prices and minimum selling prices, which comprise the prevailing 145 00:10:04.400 --> 00:10:10.400 demand and supply curves in any market, contain error of both these kinds. 146 00:10:10.400 --> 00:10:15.620 So for example, people do not have perfect knowledge of the existing stock. 147 00:10:15.620 --> 00:10:19.840 So a buyer, for example, might accept a higher price than what he actually needs to accept 148 00:10:19.840 --> 00:10:23.660 because he's under the impression that the stock of the good is much lower than what 149 00:10:23.660 --> 00:10:35.660 So you go into the supermarket and you find that chicken is selling at $10 a pound and you think that, oh, that makes sense because the bird flu killed off half the chickens in the world or something. 150 00:10:35.660 --> 00:10:47.660 But that's the wrong knowledge. Well, because that didn't happen and you've made an error in your evaluation of how much you're willing to pay or how much you need to pay for the chicken. 151 00:10:47.660 --> 00:10:52.900 Also, you can, so for example, buyers and sellers might not know of each other's existence. 152 00:10:52.900 --> 00:10:54.780 Markets might be fragmented. 153 00:10:54.780 --> 00:11:01.180 So when you're buying that chicken, you don't realize you're buying it at $10 in Kroger, 154 00:11:01.180 --> 00:11:05.100 but you don't realize that at Walmart, it's selling for $8 or $7 or $6. 155 00:11:05.100 --> 00:11:08.840 I mean, we've all made these errors when we buy a good and then we realize, oh, right 156 00:11:08.840 --> 00:11:12.140 next door, it was selling at half the price. 157 00:11:12.140 --> 00:11:16.420 That just means that the market, buyers and sellers don't know, so as a buyer, I didn't 158 00:11:16.420 --> 00:11:29.480 And of course, even if we knew of the existence of all buyers and sellers, we could not reconstruct 159 00:11:29.480 --> 00:11:34.660 the prevailing market demand and market supply curve simply because we don't know, we have 160 00:11:34.660 --> 00:11:39.820 to still make, understand or try to figure out what are the valuations. 161 00:11:39.820 --> 00:11:44.520 And of course, there's also the whole question of speculation about future trading dates. 162 00:11:44.520 --> 00:11:50.620 So a seller might decide to hold on to his stock and not sell at a certain price simply 163 00:11:50.620 --> 00:11:55.340 because he thinks he'll get a higher price tomorrow, but he's wrong in his assessment 164 00:11:55.340 --> 00:11:58.560 and tomorrow comes and he doesn't get that higher price. 165 00:11:58.560 --> 00:12:01.960 Similarly, a buyer might do otherwise. 166 00:12:01.960 --> 00:12:08.400 Well, does that mean, so given that these prices which prevail on the marketplace are 167 00:12:08.400 --> 00:12:13.140 not final state of rest prices, does that mean that, like the Marshallians, Mises and 168 00:12:13.140 --> 00:12:15.860 in the market think that there's market rationing. 169 00:12:15.860 --> 00:12:18.220 So, for example, that demand does not equal supply 170 00:12:18.220 --> 00:12:20.500 on the market at realized prices. 171 00:12:20.500 --> 00:12:22.980 Well, no, because both of them are clear in saying 172 00:12:22.980 --> 00:12:25.740 that at any realized price on the market 173 00:12:25.740 --> 00:12:29.020 is an equilibrium price, in the sense that it's always 174 00:12:29.020 --> 00:12:32.300 brought about by the intersection of certain prevailing 175 00:12:32.300 --> 00:12:34.620 demand and supply curves, even though those demand 176 00:12:34.620 --> 00:12:36.460 and supply curves contain error. 177 00:12:36.460 --> 00:12:38.660 So they are not the final state of rest prices, 178 00:12:38.660 --> 00:12:41.700 it's what Mises called the plain state of rest. 179 00:12:41.700 --> 00:12:47.700 So Mises, in Human Action, he says the plain state of rest is not merely an imaginary construction, it comes to pass again and again. 180 00:12:47.700 --> 00:12:53.700 When the stock market closes, the brokers have carried out all orders which could be executed at the market price. 181 00:12:53.700 --> 00:12:59.700 Only those potential sellers and buyers who consider the market price too high or too low respectively have not sold or bought. 182 00:12:59.700 --> 00:13:03.700 The same is valid with regard to hold all transactions in the market economy. 183 00:13:03.700 --> 00:13:07.700 In fact, Arthur Margat is much, much more explicit on this. 184 00:13:07.700 --> 00:13:12.180 He says, for example, that the only type of equilibrium necessarily involved in the establishment 185 00:13:12.180 --> 00:13:16.940 of any realized price is an equilibrium between, in the sense of equality of, the quantity 186 00:13:16.940 --> 00:13:20.300 demanded and the quantity supplied at a given price. 187 00:13:20.300 --> 00:13:23.860 The characterization of such a price as an equilibrium price is warranted only in the 188 00:13:23.860 --> 00:13:27.800 sense that in the higgling and haggling on bargaining, which may take place before a 189 00:13:27.800 --> 00:13:31.860 price is realized, transactions may be impossible at certain prices. 190 00:13:31.860 --> 00:13:36.420 The very fact that some transactions are actually realized at a given price may therefore be 191 00:13:36.420 --> 00:13:40.540 is only said to indicate that the price thus realized must have affected an equilibrium 192 00:13:40.540 --> 00:13:45.020 between quantity demanded and quantity supplied, but the equilibrium between the quantity demanded 193 00:13:45.020 --> 00:13:50.380 and quantity supplied are as a result of the prevailing, what market differentiates between 194 00:13:50.380 --> 00:13:54.740 the prevailing demand and supply curves, which could be different from the theoretical or 195 00:13:54.740 --> 00:13:59.380 correct market demand and supply curves, which would result in the final state of rest. 196 00:13:59.380 --> 00:14:03.780 So in a sense, Mises and Market would claim that the market is always in equilibrium, 197 00:14:03.780 --> 00:14:05.740 in this sense. 198 00:14:05.740 --> 00:14:09.780 Well, what about the second property of equilibrium, 199 00:14:09.780 --> 00:14:11.860 the welfare maximization property? 200 00:14:11.860 --> 00:14:15.100 As Professor Salerno has pointed out in his paper, 201 00:14:15.100 --> 00:14:20.380 Mises and Hayek be homogenized, the market is always, 202 00:14:20.380 --> 00:14:23.300 we are always maximizing our welfare in an exante sense. 203 00:14:23.300 --> 00:14:25.420 I mean, just the way individuals are always, 204 00:14:25.420 --> 00:14:27.380 when we make errors in valuation, 205 00:14:27.380 --> 00:14:30.100 we're still optimizing in an exante sense. 206 00:14:30.100 --> 00:14:32.260 We're still trying to attain the highest 207 00:14:32.260 --> 00:14:33.880 and on our value scale. 208 00:14:33.880 --> 00:14:35.820 Similarly, on the market, entrepreneurs, 209 00:14:35.820 --> 00:14:37.700 when they are assessing, when they are praising 210 00:14:37.700 --> 00:14:40.840 the marketplace, deciding how to allocate resources, 211 00:14:40.840 --> 00:14:44.660 they too are engaged, so the market in an exante sense 212 00:14:44.660 --> 00:14:46.380 is always maximizing welfare. 213 00:14:46.380 --> 00:14:48.980 And in fact, it is this conception of the plain state 214 00:14:48.980 --> 00:14:52.240 of rest which underlies Rothbard's welfare economics, 215 00:14:52.240 --> 00:14:53.880 even though he doesn't explicitly state it, 216 00:14:53.880 --> 00:14:57.540 because it's only then can you say that when you intervene 217 00:14:57.540 --> 00:15:00.100 and stop any exchange taking place on the market 218 00:15:00.100 --> 00:15:05.100 that you'd necessarily minimize or reducing market welfare 219 00:15:05.900 --> 00:15:10.260 because that only follows from this sense 220 00:15:10.260 --> 00:15:12.700 of an ex-ante welfare maximization 221 00:15:12.700 --> 00:15:14.340 which takes place in the market. 222 00:15:14.340 --> 00:15:16.940 So I quote from Professor Salerno's paper, 223 00:15:16.940 --> 00:15:18.300 from the ex-ante standpoint, 224 00:15:18.300 --> 00:15:21.180 the market economy is perfectly efficient 225 00:15:21.180 --> 00:15:22.580 because entrepreneurial decisions 226 00:15:22.580 --> 00:15:24.760 based upon monetary calculation 227 00:15:24.760 --> 00:15:27.860 always result in the appraisal and allocation of resources 228 00:15:27.860 --> 00:15:31.200 in strict accordance with anticipated consumer preferences 229 00:15:31.200 --> 00:15:32.780 in the same manner in which the choices 230 00:15:32.780 --> 00:15:35.300 of an individual actor produce a pattern of resource use 231 00:15:35.300 --> 00:15:40.040 reflecting his value rankings of expected satisfactions. 232 00:15:40.040 --> 00:15:40.880 Now, 233 00:15:43.060 --> 00:15:44.960 well, I also want to argue, 234 00:15:44.960 --> 00:15:48.340 and as Professor Hulsman pointed out when he spoke, 235 00:15:48.340 --> 00:15:51.960 that actually these deductions which Menger, 236 00:15:51.960 --> 00:15:55.060 I mean, sorry, which Mises and Margret have made 237 00:15:55.060 --> 00:15:56.740 actually are completely consistent 238 00:15:56.740 --> 00:15:59.860 with the way Menger and Boehm-Bawerk treated price theory. 239 00:15:59.860 --> 00:16:02.440 They did not explicitly make any assumptions 240 00:16:02.440 --> 00:16:03.900 about appraisal, except Boehm-Bawerk 241 00:16:03.900 --> 00:16:06.340 who made one assumption when he said that 242 00:16:06.340 --> 00:16:09.060 everybody knows the stock of the good in existence. 243 00:16:09.060 --> 00:16:11.540 But what Menger and Boehm-Bawerk gave 244 00:16:11.540 --> 00:16:13.980 Mises and others who followed in that tradition 245 00:16:13.980 --> 00:16:17.140 was the explicit treatment of the bargaining process 246 00:16:17.140 --> 00:16:18.700 that occurs on the marketplace. 247 00:16:18.700 --> 00:16:20.700 In fact, Murray Rothbard in Man Economy State 248 00:16:20.700 --> 00:16:24.220 actually tries to push the Boehm-Bawerkian price theory model 249 00:16:24.220 --> 00:16:27.160 to actually account for speculation and appraisement. 250 00:16:28.820 --> 00:16:31.340 Menger and Boehm-Bawerk literally did not deal 251 00:16:31.340 --> 00:16:33.740 with appraisement at all because, 252 00:16:33.740 --> 00:16:35.300 as Professor Hulsman pointed out, 253 00:16:35.300 --> 00:16:37.900 they largely are talking about trade which occurs 254 00:16:37.900 --> 00:16:41.940 in auctions, in stock markets, where buyers and sellers 255 00:16:41.940 --> 00:16:43.960 have lesser need to appraise because, 256 00:16:43.960 --> 00:16:45.980 through the active bidding and counter bidding, 257 00:16:45.980 --> 00:16:49.420 they actually reveal their true preferences. 258 00:16:49.420 --> 00:16:51.220 And in fact, actually, even Walra, 259 00:16:51.220 --> 00:16:53.420 in his Elements of Pure Economics, 260 00:16:53.420 --> 00:16:55.340 is largely dealing with auction markets. 261 00:16:55.340 --> 00:16:58.300 He studied the French auction markets very carefully. 262 00:16:58.300 --> 00:17:01.660 And in fact, William Jaffa, the great Walra scholar, 263 00:17:01.660 --> 00:17:06.580 in one of his papers, he points out in a revealing footnote 264 00:17:06.580 --> 00:17:10.040 that actually Walra had studied a French auction market 265 00:17:10.040 --> 00:17:13.980 where there was an auctioneer. 266 00:17:13.980 --> 00:17:16.700 So he actually took the demands and supplies 267 00:17:16.700 --> 00:17:18.900 and that actually happened. 268 00:17:18.900 --> 00:17:21.620 Well, anyway, so the whole point of, 269 00:17:21.620 --> 00:17:24.380 I mean, my argument is that the Austrians 270 00:17:24.380 --> 00:17:27.700 or the causal realists are not stuck between this devil 271 00:17:27.700 --> 00:17:31.300 on the one hand of unrealism and welfare maximization 272 00:17:31.300 --> 00:17:34.940 and no market clearing and the deep sea 273 00:17:34.940 --> 00:17:38.820 of realistic assumptions like the Marshalling's 274 00:17:38.820 --> 00:17:43.820 but no market rationing and lack of welfare maximization. 275 00:17:44.220 --> 00:17:48.020 And I think the works of Professor Salerno and Klein 276 00:17:48.020 --> 00:17:54.020 have clarified that to us who follow in the footsteps of Mises. Thank you.