Nature of Competition: Arbitragers and the Government 02

Blessed, we do not only have frictions in the physical world but also transaction costs in the economic world. Otherwise, a lot of celebs, with or without a Nobel from Stockholm, would surely lose the job and be rostered as “unemployed,” among other collateral damages.

 

Die Welt ohne Reibung. Which would you prefer, Rocky Mountains or Tower of London Ice Rink. Depending upon the answer, we can tell who you are.

             Next on: Which would be in the longer run, the mountain climbing or the skating? “Rational people think at the margin” (borrowed from Gregory Mankiw) and would “unanimously” answer that the climbing is in the long run as opposed to the skating for the short run. (Many many a year ago in a city by the sea, there was an op-ed to the effect that Gregory Mankiw appears to be trading a potential Nobel Prize for actual writing of textbooks. By design, humans prefer real to nominal.)

             Granted, are there no frictions on the short run of the Link? You might wish “Frictions were useless to us until whichever is first expired ” (adapted from Paul Samuelson and William Nordhaus, 2010). You may be right, too, as long as you are in imagination. 

             More fortunately than unfortunate, an any rate, there in reality surely are frictions. Blessed, we can do skate on the link of London and “everywhere else except for ” after the expiry (adapted from Robert Solow). 

             Thankfully, all of us, macroeconomists included, can and do avoid being differentiated into a non-organism (0) from Here or being integrated to Eternity. To paraphrase: Included in non-organisms on Earth are a particle, a pair of skates left on the Link, rocks in the Mountains, a Great Stone Face, sculptures of Rushmore, asteroids aground, … and the petrified economy as in Cambridge. Each and all they are still and stationary in M∙U⁰∙T⁰ . 

             Exogenous of Cambridge, the economy is always and everywhere in M∙U∙T^-1.

Problem of perfect information. When in the world of perfect knowledge always and everywhere in its entirety, would you if in 1980s trade “the risk of risks” called Microsoft for “the safest bet” of a distinguished student at the Harvard College? Would you in 2000s like to be another Mark Zuckerberg  at the city of Cambridge?

             You could if you prefer, wish or dream of, but not demand for it. By an endogenous design or by an exogenous chance, all the four words reside inter-substitutive in macroeconomics. But "TINA" when in economics to the last (from whom we know). Therein, “preference” is of no use to us until it keeps company with "the preferred." It’s the wherewithal, your Honor! 

             Believe it or not, you are supposed to "demand for money with money" either in "the money maker" or in the IS-LM model of Cambridge. "Big and Beautiful," but for: Is "money for money" not  sheer waste of time, the ultimate currency of all creatures in Here?

             Once upon a Time in the West, "a few dollars more" were always preferred. Rational people always thought at the margin on one hand, while on the other hand expected neither the “raining money” nor “monetary rains” down from the heavens. They could not and did not prefer liquidity until they “earned” it hard, or a bit more easily sold an asset they were entitled to. Liquidity never came as they wished. Nobody expected dollars out of blue, either.

 

For a few steps more. What if absolutely no transaction costs to the Paradise in its entirety, (yet to be Lost)? Would we, individually and collectively, be the happiest? Nope, positively no, such a paradise would no sooner arrive than we had been bored. By providence, we need changes, varieties, cycles, fluctuations, actions, thrills and the like.

             Blessed, all organisms of, in and around us keep changing, with no pause, rest or intermission. In other words, nothing is static, absolutely or comparatively. We by providence love dynamism while the environment is by creation dynamic. In sum, each and all organisms cannot be in equilibrium until Then.

             To shorten a long story, all that we can do in the volatile environment is taking a few steps more, for better than for worse, at the marginal opportunity. We in the meantime love transaction costs which are not too excessive. Umm, nonexistence, or “nothing” if we will, is not any better than “so many,” or excessiveness if you will. 

Perfectness Wanted. Later on in the American East but still in the “global” West, there was a Side Story, apocryphal may it be. A summa-cum-laude lawyer from the Princeton Law School greatly fails on her Practice because she sustains on a “constant preference” of writing the perfect contract of Theory, whenever for sake of serving her clients, .

             Beware: Never try to be perfect as she does. If you do, it’ll harm you first and the customer second. A lining in the cloud: That’ll be the first tip of business success; a benefit to the “customer first” and the harm to the customer second.

FOR A FEW DOLLARS MORE (1965)