Re: [Pen-l] Re: Question on overdetermination

["Jim Devine" <jdevine03@xxxxxxxxx>]

me:
>> In partial-equilibrium economic theory, it's neither. S&D are supposed
>> to be independent of each other, so that they determine price and
>> quantity together.

Sabri:
> My understanding of partial-equilibrium theories is a bit different:
> in a partial equilibrium theory, you either take the prices or
> quantities as given, depending on whether you are on the demand or on
> the supply side. But, what I am saying is even beyond that.

that's not the way it works. You can merge supply & demand into a
reduced-form equation.

Sabri's question was this:
>> Just before the collapse of the dot.com bubble, many
>> equity analysts promoted many stocks that they thought "shit" in the
>> private and many "individual investors" followed their recommendations
>> although some of them might thought "shit" in the private, as well.
>>
>> What is the direction of causality: were the analysts responding to
>> the demands of the investors or were the investors reponding to the
>> supply of the analysts?

I would guess that they were both afraid to break from the herd,
suffering (as they did) from the madness of crowds. No one wanted to
be the little boy who shouted "the emperor has no clothes!"
-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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