I. Trust in the playing field
To transact, people have to maintain faith in a relevant economic
horizon and in the immutability of the economic playing field or
"envelope". Put less obscurely, a few hidden assumptions underlie the
continued economic activity of market players.
They assume, for instance, that the market will continue to exist for
the foreseeable future in its current form. That it will remain inert -
unhindered by externalities like government intervention, geopolitical
upheavals, crises, abrupt changes in accounting policies and tax laws,
hyperinflation, institutional and structural reform and other
market-deflecting events and processes.
They further assume that their price signals will not be distorted or
thwarted on a consistent basis thus skewing the efficient and rational
allocation of risks and rewards. Insider trading, stock manipulation,
monopolies, hoarding - all tend to consistently but unpredictably
distort price signals and, thus, deter market participation.
Market players take for granted the existence and continuous operation
of institutions - financial intermediaries, law enforcement agencies,
courts. It is important to note that market players prefer continuity
and certainty to evolution, however gradual and ultimately beneficial.
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