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What If The Price Was Never Right?


Prices are the magic in free-market stories. But what if prices were never right? Then free markets wouldn’t work as their fans claim. The ‘markets in everything’ crowd don’t tackle the following three issues well. First, the “invisible hand” can’t benignly solve every problem, rather it creates ills that need nonmarket cures. Second, self-interest often obstructs voluntary solutions. Third, self-interested winners often distort free markets.

Free-market stories rely on price signals to coordinate “spontaneous order” from innumerable voluntary (so presumed beneficial) choices. “Spontaneous” here means undesigned. No individual needs, or can have, all the information that shapes prices. Demand changes are reflected in price changes and markets adjust automatically using the “dispersed knowledge” of many. No dreaded “central planning” is needed.

But this dispersed knowledge story concentrates attention on only one type of  spontaneous order: wherein individual incentives align with collective goals. But nothing guarantees that. In “Darwin’s Wedge” situations individual and group incentives diverge.

Darwin's Wedges abound in free markets, creating openings for profitable “price errors.” For example, polluting manufacturers have incentives to not pay for cleanup. The excluded costs create errors in price signals. And dispersed self-interest complicates voluntary fixes. Both sellers and buyers “benefit” when externalized costs yield lower prices. The seeming self-interest of market participants differs from society’s. Such divergences aren’t minor imperfections that we can safely ignore.

Generally Darwin’s wedges don’t fix themselves. Collective interests require the protection of universal rules enforced by independent referees. They’re like pro-sports salary caps: rich teams buying all the best players hurts the sport overall. Some centralized restrictions on freedom in sports, and in markets, can be beneficial.

Free markets tend to undermine themselves, but not only as Marx warned from the bottom. Self-interested winners, while seeming to be market promoters, often become market distorters, as soon as they can benefit. Many corporations decry government involvement while happily pocketing public subsidies.

Better use of market magic requires attention to the underlying motives of market-fans. Market-lovers can be easily bewitched, like those that Paul Krugman says mistook “beauty, clad in impressive mathematics” for truth. They can be too rosy-eyed about business leaders: Robert Nozick implausibly believed “the future orientation of the market entrepreneur” would conserve natural resources. Some like Milton Friedman hate or distrust government, assuming they’re blundering or corrupt bureaucracies. Among business leaders many, who honestly serve their customers, pay taxes and play fair, are vital (though flatteringly casting them as heroic savior-entrepreneurs encourages arrogance). But others are lazy, favoring deregulation to make their lives easier. And some are just scoundrels seeking easier exploitation.

The price of leaving the massive power of markets to the wrong kind of market-fan is too high. Market realists should recall Upton Sinclair’s warning: we’re all motivated to discount logic that endangers our livelihoods (or pet-theories). The “free markets” vs government frame isn’t helping. Both are needed, and neither can be safely trusted, so a balance of these powers, fitted for each empirical context, is required. Or dispersed self-interest and mindless spontaneous order won’t have benign results.

 

Illustration by Julia Suits, The New Yorker Cartoonist & author of The Extraordinary Catalog of Peculiar Inventions.

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A "very massive star" in the Kinman Dwarf galaxy caught the attention of astronomers in the early years of the 2000s: It seemed to be reaching a late-ish chapter in its life story and offered a rare chance to observe the death of a large star in a region low in metallicity. However, by the time scientists had the chance to turn the European Southern Observatory's (ESO) Very Large Telescope (VLT) in Paranal, Chile back around to it in 2019 — it's not a slow-turner, just an in-demand device — it was utterly gone without a trace. But how?

The two leading theories about what happened are that either it's still there, still erupting its way through its death throes, with less luminosity and perhaps obscured by dust, or it just up and collapsed into a black hole without going through a supernova stage. "If true, this would be the first direct detection of such a monster star ending its life in this manner," says Andrew Allan of Trinity College Dublin, Ireland, leader of the observation team whose study is published in Monthly Notices of the Royal Astronomical Society.

So, em...

Between astronomers' last look in 2011 and 2019 is a large enough interval of time for something to happen. Not that 2001 (when it was first observed) or 2019 have much meaning, since we're always watching the past out there and the Kinman Dwarf Galaxy is 75 million light years away. We often think of cosmic events as slow-moving phenomena because so often their follow-on effects are massive and unfold to us over time. But things happen just as fast big as small. The number of things that happened in the first 10 millionth of a trillionth of a trillionth of a trillionth of a second after the Big Bang, for example, is insane.

In any event, the Kinsman Dwarf Galaxy, or PHL 293B, is far way, too far for astronomers to directly observe its stars. Their presence can be inferred from spectroscopic signatures — specifically, PHL 293B between 2001 and 2011 consistently featured strong signatures of hydrogen that indicated the presence of a massive "luminous blue variable" (LBV) star about 2.5 times more brilliant than our Sun. Astronomers suspect that some very large stars may spend their final years as LBVs.

Though LBVs are known to experience radical shifts in spectra and brightness, they reliably leave specific traces that help confirm their ongoing presence. In 2019 the hydrogen signatures, and such traces, were gone. Allan says, "It would be highly unusual for such a massive star to disappear without producing a bright supernova explosion."

The Kinsman Dwarf Galaxy, or PHL 293B, is one of the most metal-poor galaxies known. Explosive, massive, Wolf-Rayet stars are seldom seen in such environments — NASA refers to such stars as those that "live fast, die hard." Red supergiants are also rare to low Z environments. The now-missing star was looked to as a rare opportunity to observe a massive star's late stages in such an environment.

Celestial sleuthing

In August 2019, the team pointed the four eight-meter telescopes of ESO's ESPRESSO array simultaneously toward the LBV's former location: nothing. They also gave the VLT's X-shooter instrument a shot a few months later: also nothing.

Still pursuing the missing star, the scientists acquired access to older data for comparison to what they already felt they knew. "The ESO Science Archive Facility enabled us to find and use data of the same object obtained in 2002 and 2009," says Andrea Mehner, an ESO staff member who worked on the study. "The comparison of the 2002 high-resolution UVES spectra with our observations obtained in 2019 with ESO's newest high-resolution spectrograph ESPRESSO was especially revealing, from both an astronomical and an instrumentation point of view."

Examination of this data suggested that the LBV may have indeed been winding up to a grand final sometime after 2011.

Team member Jose Groh, also of Trinity College, says "We may have detected one of the most massive stars of the local Universe going gently into the night. Our discovery would not have been made without using the powerful ESO 8-meter telescopes, their unique instrumentation, and the prompt access to those capabilities following the recent agreement of Ireland to join ESO."

Combining the 2019 data with contemporaneous Hubble Space Telescope (HST) imagery leaves the authors of the reports with the sense that "the LBV was in an eruptive state at least between 2001 and 2011, which then ended, and may have been followed by a collapse into a massive BH without the production of an SN. This scenario is consistent with the available HST and ground-based photometry."

Or...

A star collapsing into a black hole without a supernova would be a rare event, and that argues against the idea. The paper also notes that we may simply have missed the star's supernova during the eight-year observation gap.

LBVs are known to be highly unstable, so the star dropping to a state of less luminosity or producing a dust cover would be much more in the realm of expected behavior.

Says the paper: "A combination of a slightly reduced luminosity and a thick dusty shell could result in the star being obscured. While the lack of variability between the 2009 and 2019 near-infrared continuum from our X-shooter spectra eliminates the possibility of formation of hot dust (⪆1500 K), mid-infrared observations are necessary to rule out a slowly expanding cooler dust shell."

The authors of the report are pretty confident the star experienced a dramatic eruption after 2011. Beyond that, though:

"Based on our observations and models, we suggest that PHL 293B hosted an LBV with an eruption that ended sometime after 2011. This could have been followed by
(1) a surviving star or
(2) a collapse of the LBV to a BH [black hole] without the production of a bright SN, but possibly with a weak transient."

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