Free Enterprise market

Free Enterprise market 

Much of economics is based on the assumption that the systems that they are analyzing are a coordinated set of "Free Enterprise Markets" with entities who are guided by "Rational Actor Theory". This entry attempts to clarify my thoughts about the Assumptions and Conclusions of this situation.

Free Enterprise market. (competitive model),
  • [T]he flows of services that would be offered and purchased and the prices that would be paid for them if each individual in the market offered or purchased services at the going prices as if his decisions had no influence over them, and
  • [T]he going prices were such that the amounts of services which were available equalled the total amounts which other individuals were willing to purchase, with no imposed restrictions on supply or demand.

Rational Actor


First Optimality Theorem:
  • If a competitive equilibrium exists at all, and if all commodities relevant to costs or utilities are in fact priced in the market, then the equilibrium is necessarily [Pareto] optimal in the following precise sense: 'There is no other allocation of resources to services which will make all participants in the market better off'
Second Optimality Theorem:
  • If there are no increasing returns in production, and if certain other minor conditions are satisfied, then every optimal state is a competitive equilibrium corresponding to some initial distribution of purchasing power


Kenneth Arrow’s seminal article on the economics of medical care (pdf)

JSTOR: Philosophy & Public Affairs, Vol. 6, No. 4 (Summer, 1977), pp. 317-344 (http://www.jstor.org/pss/2264946)

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Philosophy (Main theories) - Wikipedia, the free encyclopedia

Branches of philosophy

  • Ethics, or "moral philosophy", is concerned primarily with the question of the best way to live, and secondarily, concerning the question of whether this question can be answered. The main branches of ethics are meta-ethics, normative ethics, and applied ethics. Meta-ethics concerns the nature of ethical thought, such as the origins of the words good and bad, and origins of other comparative words of various ethical systems, whether there are absolute ethical truths, and how such truths could be known. Normative ethics are more concerned with the questions of how one ought to act, and what the right course of action is. This is where most ethical theories are generated.[7] Lastly, applied ethics go beyond theory and step into real world ethical practice, such as questions of whether or not abortion is correct.[8] Ethics is also associated with the idea of morality, and the two are often interchangeable.
  • Political philosophy is the study of government and the relationship of individuals (or families and clans) to communities including the state. It includes questions about justice, law, property, and the rights and obligations of the citizen. Politics and ethics are traditionally inter-linked subjects, as both discuss the question of what is good and how people should live.


Kenneth Arrow Was Here (Editorial) HealthCare (4)

June 9, 2011, 5:34 pm

Kenneth Arrow Was Here

Some readers ask why my argument that relatively centralized systems work better for health care  (nyt) than the “free market” isn’t an argument for government ownership of everything.
The answer is that health care is different: it’s a sector in which basically every market failure you can think of takes place. And we’ve known that since Kenneth Arrow’s classic analysis (nyt) half a century ago.
It’s shocking, though not surprising, that we keep having to relearn this basic point.

Also see: 



    Budget fy2012

    There are a number of proposed budgets for fy2012. This post attempts to list them:

    also see:


    I have noted a few books, sites, and results that seem to be related to the Stanford course: 


    Graphs, and Sites

    What Americans think about income inequality in one graph -- If Americans don't think that there is a wide spread in the income distribution, then they probably will  not vote to change it.

    Mahalanobis -- The incomes of the top 3% are distributed according to Pareto's law, (20/80 law) where as the lowest 97% are distributed according to the distribution of energy in gas, e.g. Boltzmann-Gibbs. (Original article, " Why it is hard to share the wealth, 12 March 2005" New Scientist) -- I think that this means 2 things:
    • There is a difference between the way income is distributed amoung the rich and the poor, at somewhere around the 3% point. e.g. Adjusted Gross income of ~ $100,000
    • The poor's income is distributed randomly e.g. as though in any interchange where as the rich'd income is distributed as though in an interchange the richer one was the more benefit one got from the interchange.
    And here is one of the papers "Pareto's Law of Income Distribution: Evidence for Germany, the United Kingdom, and the United States" --  that shows that the Incomes of the countries are roughly Power Law distributed.

    The Gini as a "function" of Democratic score, I realize that this is just one plot, but it sure does NOT indicate a strong correlation...

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