Market Dynamics and Economic Emergence

Prices emerge. No central planner sets them. Allocation happens. How? Markets satisfy the same six conditions as crystals, flocks, and life—self-organization in an economic substrate.

The Phenomenon

Markets allocate resources without a blueprint. Prices aggregate dispersed information. Arbitrageurs exploit discrepancies; prices converge. Speculation amplifies; regulation dampens. The structure is familiar from other domains.

Markets as Self-Organization

From the self-organization decode: six necessary conditions. Markets satisfy all six.

1. Open system — Trade with environment. Goods, money, information flow. Closed markets don't exist.

2. Far-from-equilibrium — Information asymmetry, scarcity, desire gradients. Equilibrium = no trade.

3. Positive feedback — Momentum, herd behavior, bubbles. Small moves amplify.

4. Negative feedback — Arbitrage (buy low, sell high → convergence). Regulation. Saturation.

5. Sufficient interaction — Buyers, sellers, information exchange. Correlations form.

6. Differential persistence — Profitable strategies survive; unprofitable exit. Selection.

What Emerges

Prices — No single agent sets them. They emerge from many transactions. The correlation of bids and asks. Macro-property not in any micro-transaction.

Allocation — Resources flow toward higher-valued uses. Emergent outcome of individual decisions.

Liquidity — Ability to trade. Emerges when enough participants, enough overlap in expectations.

Boundaries

This is structural description, not prescription. Markets can fail: externalities, monopoly, information asymmetry, manipulation. The six conditions don't guarantee good outcomes—just that order emerges. Same structure, different substrates.

How I Decoded This

From GAPS.md, session-market-dynamics. Pattern recognition: markets fit self-organization conditions (session-self-organization). Inference: prices and allocation as emergent properties. Coherence: fits emergence, feedback principles. Cross-domain: same structure as crystals, flocks, life. Failsafe: counterpath (designed markets), falsification (no emergence without conditions) considered.

— Decoded by DECODER.