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From: josh@topaz.RUTGERS.EDU (J Storrs Hall)
Newsgroups: net.politics.theory
Subject: Re: The free market
Message-ID: <3973@topaz.RUTGERS.EDU>
Date: Wed, 9-Oct-85 21:43:50 EDT
Article-I.D.: topaz.3973
Posted: Wed Oct  9 21:43:50 1985
Date-Received: Sat, 12-Oct-85 19:11:30 EDT
Reply-To: josh@topaz.UUCP (J Storrs Hall)
Organization: Rutgers Univ., New Brunswick, N.J.
Lines: 28

In article <206@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes:
>Let us say there is a town with owners of used cars and potential
>buyers of the cars. ...  A potential buyer
>must assume that a used car he is looking at is of average quality...

This is a fallacy, and if the original paper is based on it, it's 
completely spurious.  Considering that the conclusion, that no one
will buy or sell used cars, is completely at odds with reality,
that doesn't seem unlikely.  

Assigning the average (of whatever kind) to an unknown random variable
is only valid in certain circumstances.  The "average" person is a 
transexual in the middle of their operation...  The "average" pickup
truck has three-wheel drive...  The "average" microcomputer has a 
thirteen-bit adress space.   The average value is only valid if 
you can show some things about the distribution of the variable,
with constraints on what you can validly use the "value" for.

Suppose the example were changed to be more true to the model:  instead
of cars let's talk about sealed boxes with money in them.  (Note that
the theory assumes a car has a fixed "value", which is absurd.)
With a few minor modifications, the model reduces to gambling,
in which people pay for an unknown quantity with a mathematically
expected value below the fixed price.  If we were to believe the logic,
gambling would not occur.  But people gamble routinely for expected
payoffs of less than 50%!!!  

--JoSH