Perfect Economics in an Imperfect

Perfect Economics in an Imperfect World

The Longstaff article is an exploration of how the most basic and idealistic economic concepts differ from the real world markets. The author points out that much of the frustration and anguish that many people feel toward modern economists comes from the same misunderstandings about the market that can often create an unnecessary mystique surrounding them. The markets are not as simple or as perfect as economists and those who are teaching and learning in this field would like to think.

Longstaff argues, at the foundation, that one of the biggest reasons markets do not behave as perfect economic models is the fact that humans by nature are fallible, and that they lack the basic trust and feeling of economic community that is required for such a perfect marketplace to exist. There are many assumptions that economists make in regards to perfect markets. These assumptions are spelled out at the beginning of the article, and most have to do with perfect market equality, access to information, and balances between supply and demand. But these assumptions only go so far as to explain the reality of the markets.

Longstaff offers some antidotes to the problems currently experienced by the markets. He feels as though corruption and the inequality of opportunities and access to information hinder the smooth operation of the markets on a global scale. He argues that corruption should be eliminated and that developing countries' economies should be given special consideration due to the fact that since they are newly developing, they may not have access to the same information and opportunities that more developed economies have. He also argues that there needs to be a global safety net for individuals and economies that suffer from hardships and hurdles. These safety nets would give assistance to those who need it most, giving priority to developing economies. As economies and people grow more interdependent, the gap between the "have's" and the "have not's" grows wider and wider. Longstaff sees this as a negative consequence of the informational and opportunity inequalities that are becoming more and more prevalent. He argues that people need to be more "fair" to each other and that corporations and individuals should not prey on other, weaker economic entities and individuals at the cost of the equality and fairness within the markets.