Quote:
Originally Posted by blk911
...would tend toward an equilibrium (Adam Smith's Invisible Hand Theory). ...
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- yes, that's the theory -- see my remarks re equilibrial theories above.
Here is what Keynes said (paraphrase) when someone mentioned that in the long run the economy would tend toward an equilibrium:
"Yes, but in the long run, we shall all be dead."
And that is why we need regulatory agencies in this area. They act like the shock absorbers (dampers) on your car -- they dampen out the highs and lows just like on a clock pendulum or any other driven harmonic system. Of course, here the system is vastly more complex and can produce extremely complex behavior - you might try Googling "stable limit cycles" and see what pops up.