ABSTRACT
Variability in production conditions and in input prices encourages farmers to try different production methods, and this experimentation can lead to progress that would never occur in a purely static world. Variability in output price encourages investment in information and innovation in marketing. S. Grossman and J. E. Stiglitz give formal definition to the idea that price instability is necessary to provide incentives for the efficient functioning of an economy containing random variables. It would certainly be a big mistake to try to suppress all price variability whenever a continually evolving and stochastic economy generates it. Missing markets provide a rationale for governmental action, perhaps to establish property rights in environmental goods. Providing an economic analysis of any of these issues is difficult, and can only be done by simplifying the problems greatly.
