ECN 340 Lecture Notes - Lecture 8: Economic Planning, Risk Management, Safelite
3 Dec 2017
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Document Summary
The economic value of failure: failure arises because of , basic human condition of scarcity, human search for greater rewards, lack of information particularly in the market system. Information is costly both in the product and resource (land, labour and capital) market: fir(cid:373)s (cid:272)a(cid:374)"t al(cid:449)a(cid:455)s tell (cid:449)hi(cid:272)h produ(cid:272)ts (cid:449)ill sell. Idea of a balanced portfolio in the stock market has the idea of planned failure in it. In business, firms can carry more than one line of goods and services. In some cases some will simply be lucky or unlucky: hould (cid:862)(cid:449)i(cid:374)(cid:374)ers(cid:863) help (cid:862)losers(cid:863) > depe(cid:374)ds. Conclusions: to accomplish anything need to take some risks, more dynamic an economy the more failures likely. How can economic failure contribute to efficiency: sending signals of what should and should not be done. When is it and when is it not: only when contracts are broken is it unfair, system neither fair or unfair.
