The Market for Lemons car. This, in turn, motivates the owners of moderately good cars not to sell, and so on. The result is that a market in which there is asymmetric information with respect to quality shows characteristics similar to those described by Gresham's Law: the bad drives out the good. (Although Gresham's principle applies more specifically to exchange rates, modified analogies can be drawn.) Akerlof considers a situation in which demand "D" for used cars depends on the cars price "p" and quality "µ" = "µ"("p") and the supply depends on price alone. Economic equilibrium is given by "S"("p") = "D"("p","µ") and
The Most Good You Can Do Law School professor Eric Posner reviewed the book for "Slate Magazine", concluding: "So what’s an effective altruist to do? The utilitarian imperative to search out and help the people with the highest marginal utility of money around the world is in conflict with our limited knowledge about foreign cultures, which makes it difficult for us to figure out what the worst-off people really need.* For this reason, donations to Little League and other local institutions you are familiar with may not be a bad idea. The most good you can do may turn out to be—not much." Posner wrote a