What your students are learning down the hall (fwd)

This is from Mathew Forstater from pkt on the text-book definition of
markets. forwarded by the permission of the author.

The quotes are from Peter Rose's book _Money and Capital Markets_ 

Mine


>"The financial system is one of the most important inventions of modern
>society.  Its primary task is to move scarce loanable funds from those
>who
>save to those who borrow to buy goods and services and to make
>investments
>in new equipment and facilities so that the global economy can grow and
>increase the standard of living enjoyed by its citizens.  Without the
>financial system and the funds it supplies, each of us would lead a much
>less enjoyable existence."

>"What is a market?  It is an institution set up by society to allocate
>resources that are scarce relative to the demand for them."

>"There is considerable research evidence today suggesting that all
>financial
>markets are closely tied to one another due to their perfection and
>efficiency.  What is a perfect market?  It is one in which the cost of
>carrying out transactions is zero or nearly so and all market
>participants
>are price takers (rather than being able to dictate prices to the
>market).
>In such a market, there are no significant government restrictions on
>trading and the movement of funds; rather, competition among buyers and
>sellers sets the terms of trade.
 >   Some financial markets may also have another very desirable
>characteristic: The prices of financial instruments may accurately
>reflect
>their inherent value and fully reflect all available information.
>Moreover,
>any new information supplied to the market may quickly be impounded in a
>new
>set of prices.  A market in which prices fully reflect the latest
>available
>information is an efficient market.  In an efficient market, no
>information
>that might affect security prices or interest rates is wasted.  Thus, no
>buyer or seller can expect to reap excess profits from collecting
>information and then trading on the basis of that information.  As we
>will
>see in Chapters 3 and 27, numerous studies of the financial markets
>spanning
>decades suggest that they approach fairly closely the ideal of a perfect
>and
>efficient marketplace."

>Peter S. Rose, _Money and Capital Markets_, 1997, Irwin.


>I think that in some ways the middle quote is the most astounding.  A
>defining feature of a capitalist economic system is its
>demand-constrained
>nature.  Yet, here we are told that resources are 'scarce' relative to
>demand!