Question

Briefly outline how prices and self-interest in what Beinhocker defines as ‘Traditional Economics’ serve as signals for and lead to outcomes that are beneficial outcomes for societies. What role does the assumption of a single and stable equilibrium outcomes play here?

Answer 1

Traditional Economics is commonly refers to the exchange of the services through barter system of producing of goods in order to satisfy the basic needs of every common man and also the production of goods and services are based on the old customs and beliefs which are followed by generation of generation right from earlier days before the existence of monetary system introduced in the modern society and re-structuring the society with the currency-based payment of services for the every unit of purchasing goods from all the buyers. Let us discuss the beneficial outcomes explained by the Beinhocker by using the basic terminology of Traditional Economics.

According to Beinhocker, there is no stable solution for the equilibrium for the stages of the market. All firms are competing with their own sale of products. Such competition of market equilibrium forms the base for the beneficial outcomes for societies in order to make the best choice among existing alternatives of purchasing the similar features of all the goods of the firms with limited amount of volume.

Such purchasing power of the thinking mainly lies only with the behavioral pattern of all the consumers by their own way of choices. For example buying the Car or Bike depends upon the customers tastes and preferences regarding the goods in which they have full confidence and also their keeping the accurate assumption of having good reliability and features on the particular products of any type. This is called as the rational thinking of the consumers. Such prudence rationality of the consumers are mostly studied by the market research done by all the firms before introducing the new products in the market. This may be very tough position of the firms who produces homogeneous products in the perfect competition. So the firms may avoid to do time consuming approach by the ways of capturing the tastes of the people, They can newly adopt the scheme of Evolutionary approach in which automatic transformation of old style to the new style is determined by calculating the new pulse rate of the consumers towards the changing style of every products which are being manufactured in the every market cycle.

By analyzing from the above mentioned derived ideas of traditional economics, the role of assumption of a single and stable equilibrium outcomes plays as a Optimistic adoptable approach in the aggregate market level of all periods in which all firms are compete to see their own products within the target to achieve wind fall profit beyond their capacity of production of more goods and services at one stretch. Such approach also nurtures the evolutionary adaption of all consumers towards the awareness of having trend and reliable products without compromising on quality as well as their Economic budget to buy their products with their own choice.