Brad writes: >With no externalities, no increasing returns, no market power, etc., the Walrasian equilibrium of a market economy maximizes a particular social welfare function..... < why is this model of the market relevant in any way? Have there been any empirical tests indicating that a model of the world that assumes away externalities, market power, increasing returns, etc. fits the data? Or is the theory justified by the MF's "positive economics," i.e., that it doesn't matter how realistic the theory is as long as it predicts pretty well? Brad paraphrases one Chicago school answer to his "utilitarian" rejection of simply using the market as a measure of what's good for humanity (in terms of distribution): >... in practice the distribution of income is very hard to move, and in practice the average change in relative distribution from economic policy will be very small. ...< Hmmm... it sure seems as if the Chicago school, via its political disciples in the Reagan and Thatcher administrations, the World Bank and the IMF, etc., etc., have succeeded in "moving" the distribution of income in the direction of greater inequality on the national and international levels. Their own experiment thus contradicts this theory. Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/Faculty/JDevine/JDevine.html
