There is an abundance of books on various aspects of economics, but very few that discuss what is the purpose of market analysis.
This article looks at the question “What is the purpose of market analysis?”
As an economist, I am constantly asked to analyze the effectiveness of different economic policies, and in the context of a particular research project I have been required to follow a strict sequence. In other words, I was to look at some indicator and then use it to make some forecasts. As it turns out, almost all the forecasts turned out to be wrong!
This all started when I decided to write a book about the impact of fiscal and monetary policy on the economy, and I decided to take some of the economic policy makers who were applying the same techniques on the public finances. Of course, one of the economists I chose did not agree with me, and instead wanted to change the topic of my book from the expenditure side of the government budgeting exercise, which I called economic analysis, to the spending side.
I put a lot of effort into proving him wrong, and it worked, but I was soon confronted with the fact that the economic policy makers were unable to follow a rigidly formalized series of rules. The whole theory of formal economic analysis had been shattered by the economists I had been following. They had not believed in the economists who had written many books on economics, and even though I did not follow the economic history of specific countries, they still disagreed with me.
This left me in a rather worrying position: although I still had a lot of ideas for a book, I was still unable to write it because the practical problem was still there. What had happened to market analysis? Why was it no longer a useful source of information? How can one conduct an effective economic analysis in a capitalist system where the state controls the national money supply?
The truth is that the reason that the market analysis is no longer needed is that the state controls the money supply. The only reason why we still need market analysis is that we can still use it as a means of educating the general public about the workings of the market, but the principles of market analysis are not applicable. One of the main principles of market analysis is the absence of hierarchy, and therefore the division of functions between the market maker and the market taker is not valid in a socialist state.
I have developed a series of theories that explain what is the purpose of market analysis.
I believe that one has to consider both the positive and negative aspects of the market, as well as its benefits and drawbacks. Most of the time, these theories are correct and have stood the test of time.
First, I argue that the mechanism of the market has a positive side. As a system of trading, the market allows us to trade efficiently by allowing us to obtain a large amount of information simultaneously, so that we can determine the best possible price for each product or service. We can also respond immediately to changing economic conditions and we can reduce costs and competition by pooling resources and buying and selling resources.
Second, I believe that the greatest risk that we face as market participants is the potential risk of fraud or deliberate manipulation of the market. This is related to the concept of market concentration, which means that there is a fixed amount of money that any individual is allowed to invest, and this means that a single individual can control the market and manipulate the price of a particular good or service.
Third, market analysis can also help prevent fraud or manipulation. It is possible to identify fraud in the market before it is completed, and to prevent the fraudulent actions that have already been carried out. For example, if a company has enough resources to buy all the widgets in a particular area, and it is doing so, then it is obviously not doing so by accident.
Fourth, market analysis can provide a good description of a market. If there is a successful project, then market analysis can give us an indication of whether or not it has been a success. Furthermore, it can give us an indication of how likely the market participants are to make another such project, and this can be very helpful in predicting future trends.