Thursday, June 01, 2006

Why equilibrium


Economists strive for economic equilibrium... Why? Is it a fact that an economy with equilibrium is a perfectly balanced state of economic wellbeing? Is it not true that being in an economic utopia everyone benefits, rich and poor alike? I think a balanced economy is purely theoretical.

Imagine in the real world where an equilibrium existed. Demand and Supply were matched and monetary surplus and deficits were at an equal ratio nationally across all countries. If this was the case would the global economy collapse. World economies thrive on being out of balance. There must be inequality with economies to make them work. Micro economics with countries is being replaced with global microeconomics. Instead of state to state and province to province economics balance it is now country to country. It will never be a balance either at a local of global level but the thrive must exists to become a close as possible to a balance. If the demand and supply ratio get too wide then inflation, depression is a product. If equilibrium is too balanced economies lose their leverage against each other. So we have Peaks and Troughs. Peaks of Surplus and Troughs of Deficit. The Troughs will always try and take from the peaks and the peaks will always try a make the troughs deeper to maintain their leverage of the trough.
In this data and age is it not strange that with the technology of the stock exchange to stop computerized selling to prevent an economic collapse via market panic why do we think that we are not being governed by the same mechanism.