Sunday, January 02, 2011

Far-From-Equilibrium State Between Equilibria

The far-from-equilibrium state exists between the solid-equilibrium state and the chaos-equilibrium state. Life, for example, exists between crystal and liquid; the weather exist between the relative-to-gases "solid" liquid and gases (gases are at equilibirum under constant pressure and temperature).

If growing, dynamic economies are in far-from-equilibrium states, then this suggests that it lies between two equilibria -- a "solid" state and a "chaotic" state. If arbitrage entrepreneurs are aiming at moving prices toward equilibrium, as Kirzner suggests (and I've noted previously), then toward which equilibrium are prices being moved? This of course begs the question of how we would define "solid-state equilibrium" and "chaotic-state equilibrium" in relation to the economy. And that is the question.
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