There is one question I want to ask you, and that is: Is there an economics equivalent to the thermodynamic law of entropy whereby the "disorder" of a system is constant?
Thus if a large (continental) part of the Euro gas market is strictly regulated and governed by stable long term contracts, then the volatility of the unregulated part of the market (UK) increases dramatically to accommodate imbalances in supply and demand that would otherwise be absorbed over a much larger volumes in the system as a whole.
At times of supply surplus the Brits would be laughing at the "sclerotic" continental system which is paying "over the odds" for gas that is available cheaper on the spot market, at times of shortage the reverse would b the case.
But what we are really seeing is the dynamics of two subsystems in a larger system, one which has been "frozen" into relative stability, and the other which exhibits extreme volatility which might otherwise be dampened over a much larger market.
Of course the overall system or gas market isn't an entirely closed system and changes over time - but at any one time regulation in one part produces relative stability at the expense of volatility in any part that remains unregulated.
Over a period of time, regulation and planning, if done well can anticipate future trends and bottlenecks or surpluses in supply and plan accordingly, and greatly improve the "efficiency" of that part of the system by buying short when prices are high and long when prices are low.
If done on a large scale compared to the size of the market it can influence prices to its advantage by anticipating trends, and it's sheer scale gives it an enormous advantage over a smaller player which simply doesn't have the market intelligence, bargaining power, and financial muscle to influence the market.
I didn't do economics 101, so this is looking for freebee education! Index of Frank's Diaries
So here it goes: if I'm not mistaken, the thermodynamic law of entropy that was referred to before goes as: "in a closed system, entropy may only increase", translated into "in a closed system, disorder increases". You may have partial ordered areas/sub systems, if the global system has higher entropy/disorder.
I really think that it corresponds to what was intended, but it would need a bit of checking before using the metaphor in answer to the above diary.
Happy new year to all contributors (and readers)! A free fox in a free henhouse!
I also included more implicit criticism of what Frank wrote in my LTE draft. *Lunatic*, n. One whose delusions are out of fashion.
I know my first comment is not really interesting, relatively to the current issue. It's just that I am of the science/technical persuasion, if i may say so, and this particular law (the entropy one) was one of my favourites at university... ^_^
I'll try to post later a more issue related comment... A free fox in a free henhouse!
Yes, it is called trust, a homeostatic condition denoted by constancy, given that economics is an ideology and entropy is a statistical fact.
In praxis the complement of trust is distrust. Then, mistrust is psychologically and congnitively synomous with entropy, a condion of volatility, actually.
None of which has anything to do with theoretical predicates of price equilibrium. Rather, transaction processing. Diversity is the key to economic and political evolution.
