Why would simultaneous transactions matter? What is an example of a non-simultaneous transaction?Your example is obviously difficult to illustrate with the typical framework, because the coconut market is simultaneously the fish market, and because of a few other factors
It's more than just supply and demand. It's equilibrium pricing that is at stake. Per my theory, a perfect equilibrium price is impossible and to truly understand how pricing really works...you need to understand supply + demand + X factor...bargaining power. The study of bargaining power is the great 'undiscovered country' in economics., but I don't see where the big problem is, tbh. Say A produces 8 fish and B produces 8 coconuts. A and B meet and bargain until a price and quantity is reached at which nobody could benefit by additional trade anylonger. S&D functions are obviously theoretical constructs for us to understand the world and to do modeling. They "exist" in the same way mathematical concepts "exist" in reality.
But that's impossible...don't you see? Say, I can only make a blueberry pie with the help with person A. Person A can only make the pie with the help of myself. The Blueberry pie is an exclusive product of our trade (cooperation). Now how should that pie be divided? I can say to person A...you either give me 3/4ths of the pie...or I won't help you bake it. I could demand 7/8ths of the pie...little difference. If he refuses he gets no pie. He can pull the same game with me and say that his contribution was needed to produce the bakery, so he should be entitled to a majority. Where we split the pie is quite subjective erratic and would depend on bargaining power (or the ability to threaten withdrawal from trade).But we could try to estimate S&D functions on that island by doing a survey. We ask the fisher at what price (in terms of coconuts/fish) he would not be willing to trade a single one of his fish for a coconut. Let's say he states that the highest price at which he would sell a single fish would be half a coconut/fish. The price at which he would sell 4 of his fish would be 1 coconut/fish. The price at which he would sell 6 fish would be 3 coconuts/fish and he would never sell more than that. We could ask every possibly price level or ask a few and approximate the rest of the function.
Now we do the same for the coconut farmer and the point of intersection of fish supply and demand function is approximately going to be our market clearing price. Like in this example:
So if I'm trading my garden blueberries for my neighbors flour...how do we plot our nice micro-economics S&D curve? How you can objectively state I'll trade %35.87 of my pie for flour? And not say 87.23%?
Trade means 1 + 1 = 3. If 1 + 1 = 2...we would not trade...because self-sufficiency would do the job. The question then is if 1 + 1 =3...then how is 3-2 subdivided?
It's self defining...circular definitions are illogical. You need marginal utility to determine price...yet price is need to determine marginal utility.I still don't see what's contradictory about supply and demand from a logical point of view.
Many HAVE pointed out the problems with equilibrium theory. But they are ignored because the status quo is so entrenched. Being the status quo doesn't make them right.Believe me, somebody would have found circular reasoning until now. Some economists are the most rigorous logic-nerds I've ever met. You can tackle almost every single axiom of modern day micro-economics by pointing out why they don't hold in reality, but the logic itself is totally sound, once you accept the axioms.
Supply and Demand assumes the dimension of time where in reality time is an illusion with price theory. Price theory is merely the ratio by which trade takes place. There is no cause and effect with price theory as there can be no first cause because what would cause cause?
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Originally Posted by randpaul2016
