Quote:
Originally Posted by stevehertz
Quote:
Originally Posted by GrimJosef
... If the market price stays stubbornly where it is then I'm afraid that that means that not enough people agree with you about the worth of the goods  . |
It's not that simple as you have to take into account perception of quality as an intrinsic part of the buying process, not just finite quality ... in truth it is far more complex than mere logic. |
Actually it is that simple. My last sentence describes what happens when there is a heightened
perception of quality. People think those goods are worth more, and so they will be prepared to pay more for them and the market price will stay high.
In general Adam Smith is addressing what we'd expect to happen when markets reach a steady state. He gives lots of examples of circumstances when market price can sit above natural price. He also says that those circumstances can persist for surprisingly long times, especially if protected by law. But in a free market, where people act rationally, they will eventually fade away.
To be fair on Smith, he was inventing (or was it discovering, or was it just codifying ?) economics for almost the first time. His axiom of rational actions on the part of the market participants has not, since, gone unchallenged (as mentioned in passing here
https://en.wikipedia.org/wiki/Neoclassical_economics).
Cheers,
GJ