10/27   In housing markets, why is high prices associated with high number of
        transactions, and low prices associated with low number of
        transactions?  From my simplistic view using supply and demand curves,
        the prices and the number of transactions should be independent.  Thx.
        \_ Doesn't that indicate that more people buy houses as investments,
           rather than as a place to live in?  Sad sad world.
        \_ Gee, "supply and demand curves" are not as gospel as the little
           Invisible Hand is Everything brains believe.  Here's a hint, simple
           rules for complex systems are never right.
           \_ simple rules often are correct for statics or equillibrium
              conditions, e.g. conservations rules, but often you are
              interested in dynamics or out of equillbirum situations.
              analogous to the great conservation rules in physics are the
              "great" accounting identities in econ.
              "great" accounting identities in econ. the simp;est explanation
              of higher prices being postiives correlated with higher
              transactions is liqudiy preference, but there are some
              subtler issues that are difficult to summarize here. it involves
              modeling some asymmetries between the buyers and sellers,
              modelling the growth of the housing stock in an area and the
              change in demand in that area etc.
              \_ The economy is *not* an equilibrium system, despite
                 what traditional econ teaches you (and then attempts
                 to un-teach you at the graduate level).  Check out
                 "The Origin of Wealth" for a good overview.
                 \- yes, and the same is true of "real world physics". but
                    the point is that you first learn simple normative stuff
                    [PV=nRT, F=ma, GDP=C+I+X-M], and than add increasingly
                    complicated boundary conditions and complicating factors.
                    these simple rules are often quite powerful when thinking
                    about problems, e.g. the parition of energy, energy
                    conservation etc. it cant answer all questions ... like
                    the positive effect on trade vs loss of purchasing power
                    when your currency goes down, but it's a necessary starting
                    point. BTW, you want wish to see the "new growth theory"
                    whichs seems to try an account for some of the stuff
                    in the book you mention. the "king" of new growth theory
                    is PROMER, formerly of ucb dept econ, currently at the
                    'Fraud, not related to DROMER and CROMER currently still
                    at UCB Econ. (whoa, according to wikipedia PROMER is the
                    son of RROMER. "i did not know that.").
                    \_ Agreed, but at least in Physics the simplifying
                       assumptions and abstractions allow you to make
                       predictions which are still borne out when you
                       introduce complicating factors.  The issue with
                       the assumptions made in traditional econ is that
                       they often don't hold up in the real world.  Thanks
                       for the pointers, btw.
                       \- there are some areas where "economics" most
                          definitey is in equillibirum: cross-currency
                          arbitrage for example. now you are right, long
                          term currency rates are uncertain. and yes that is
                          why in advanced econ classes you study stuff like
                          dornbusch overshooting, CIP, UIP, PPP etc. and
                          the other thing is some of these "simple normaitve
                          statements" do lauch research agendas, like the
                          efficient markets hypothesis ... you dont have to
                          believe in that has a description of the mkt but it
                          is a starting point just like "rational economic
                          man" is a point of departure from normative to
                          behavioral economics. OK TNX.