In the late 1990s, a term "New Economy" was in fashion. According to Brian Arthur, the pioneer of economics of complex systems, while the Old Economy was based on the law of diminishing returns, the New Economy is based on the law of increasing returns, and it means the growth without inflation that boosts up the eternal rally of NASDAQ. What is wrong with this theory?
If it is competition that promotes the progress, the lock-in by the defacto standard, as it stops the competition of standards, seems undesirable for the progress of our civilization, not to mention that by an inferior standard.
The defacto standard is an in fact public standard that the market mechanism has selected, while such a standard is called the dejure standard that becomes widespread because of formal approval by a public standards organization.
Speculation is investment in the hope of capital gain rather than income gain. Many people consider speculators dangerous and, when the market loses its stability, some politicians make speculators the scapegoats for the crisis and try to regulate the market. Are they really responsible for it?
Why does money have value and circulate, though it does not have value in itself? I will answer this question in terms of the system theory.
What is the criterion for reforming social systems? Let's examine utilitarian, Pareto and Kaldor improvements.
Economists usually consider consumption opposite to production. From the viewpoint of entropy, however, there is no difference between them. You can describe both of them as an increase in entropy of environment in compensation for reducing the entropy of a system.
What makes merchandise valuable is usefulness and scarcity. Air is useful, but has no value, as anyone can get it easily. Trash is, even if it is very unique and hard to obtain, valueless, as it is useless. What then do both have in common?
The costs to society caused by the consumption or production of goods that are not incorporated into the price of the goods, such as those of pollution or shortage of resources are called external diseconomies. The Pigovian tax internalizes this externality inside the market. For example, if producers do not bear the cost of garbage disposal, they will produce more than socially necessary. If the cost is included in the price of products beforehand, it will reduce the supply to a socially desirable amount. Thus, the Pigovian tax can achieve Pareto optimum, the most efficient allocation of resources whose utility cannot increase without decreasing anyone's utility.