The Free Market Center
Theory of Variation
Understanding the performance of the system requires knowing what performance results from the structure of the system (common cause) and what performance results from anomalous influences (special cause). Markets allowed to operate free of intervention develop a structure that makes performance, within certain latitudes, relatively predictable.
Interventionism, in attempting to resolve seeming performance discrepancies, usually makes the air of treating a special cause as though it were a common cause. This has the detrimental effect of disrupting the effective and efficient operation of the market as a whole.
I will try to get back to this point when I discuss various forms of intervention.
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