Econ Discussion On The Market And Knowledge Essay

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A DISCUSSION ON THE MARKET AND KNOWLEDGE: DO MARKETS FAVOR THE PARTY KNOWING MORE? “Markets tend to favor the party that knows more.” True or false? So if you think you might know less, how does that change your behavior? Webster defines knowledge as “the fact or condition of being aware of something” and wisdom as the “ability to discern inner qualities and relationships” and finally, superior is defined by Webster as “of higher rank, quality, or importance.” The market does not desire to have a situation of superior knowledge and wisdom as the “superior” position causes the market to be “fairer” to one than the other. Better said, the market prefers knowledge to be equal thereby allowing equal opportunity to and within the market place. Inequality in the market, also known as information asymmetry, is a situation wherein one party has more or better information than another causing the market to be biased, which may lead to the market creating preferences. This results in an imbalance in private property rights, which is the anti-thesis to the open market. One might offer that Marxism manifested itself on the concentration of knowledge in a central force that “knew enough for all,” hence denying knowledge to the market resulting in a catastrophic 50 year slide into oblivion. One of the best examples of “more” knowledge and the market is the concept of insider trading. Insider trading is a concept wherein corporate “insiders” have information available to them not available to the general public which they use to gain an “unfair” advantage. Martha Stewart was convicted of “insider trading.” “According to U.S. Securities and Exchange Commission (SEC), Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock on December 27, 2001, after receiving material,

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