Functions of the Price Mechanism

There are, according to standard capitalist economics textbooks, three key functions of the price mechanism: informing, incentivising, and rationing.

So, prices firstly collect and make available information about costs and utilities, secondly they ensure that producers have an incentive to make the right amount, and thirdly they ensure that scarce resources go only to those with sufficient desire/ability to buy them.

What might a communist say about this?

EDIT: In the interests of clarity – my goal in this post is twofold. Firstly, it is a critique of society as it now exists. This society is capitalist (dominated by a class who control the means of production), market-based, but not free-market based in the fullest sense (that dominant class has both economic and also political power, which it wields extensively, often distorting markets). Other societies, such as the USSR, might be called (loosely) non-market capitalist: markets were not central to the economy, but a class of capital-controllers were in power.

Secondly, it is a contribution to debates within the libertarian left. Some anarchist socialists support a large role for markets and pricing. Others, such as myself, are communists in the sense of generally supporting conscious collective planning over market-based coordination. In critiquing the claimed advantages of the price mechanism I am thus offering a comradely argument from one anticapitalist strand to another.

Not every point here will apply equally to both of these goals.

Let’s start with the informational function. By looking at the price of something, and how it changes, you can learn about the balance between the costs of producing it and the utility that people place on consuming it. But how well? The first thing to note is how limited it is a measure – most obviously it doesn’t include any of what are called ‘externalities’. If the production of some fridge costs £5 in materials and £50 in atmospheric degradation, only the £5 is registered, because other people pay the £50.

But also, knowing how much something costs to produce now, doesn’t tell us whether we’ll run out of the key inputs in 5 years. Moreover, in conditions of imperfect competition (aka. the real world) prices give us an inextricable mixture of ‘how much it costs to produce’ and ‘how much we can get people to pay’.

And we have no idea why people are buying the product – how much of people’s preference has been created by advertising, and how much by how the product actually tastes? Are they buying it based on expectations about future changes in price, or to actually use?

And most of all, prices don’t distinguish between a rich buyer who has taken a fancy to X and a poor buyer who desperately needs it. That is, all demand information is severely distorted according to the prior distribution of wealth. So without knowing who bought your product, you don’t really learn much about how desired it is.

This is why even now, in our market-based economy, a huge amount of time and effort is spent on gathering the kind of information supposed to be provided by prices. This is a particular application of the argument: if planning is so inferior to markets, why are markets dominated by companies, which are themselves planned?

So the price mechanism is a single very partial source of information, which gives useful information only in conjunction with other sources. So, since economies have worked without many of the info sources currently available, why should they also not work without prices? Is there something specifically important about prices?

The typical answer is that prices have a very great ‘reach’ – they can suck in information from a huge number of individual choices and bring it together, i.e. they don’t depend on the information possessed by any particular agent (a government, a company executive) but on information possessed by every agent.

But that just begs the question – assuming that no other information-processing structure can access the information held by myriad agents. And the obvious answer is: to ensure that information from everyone is processed, put everyone in charge of managing the economy, through federated workers councils. More democracy = more ‘reach’.

The price mechanism is merely the best alternative to economic democracy, the transmutation of individual participation into the mechanical numbers of supply and demand, the separation of each agent from each other agent so that instead of people talking, money talks. Because of course, economic democracy means people organising themselves, and the end of rule by a minority class. Prices are safer.

So once the secrecy that accompanies mutual hostility (in both business and politics) is replaced by publicity and information-sharing, communism has not just as much information as a market economy, but more.

Secondly, then, what about incentivising producers? Well just as prices give a hopelessly skewed measure of what people want, they (or rather, the profit motive) will incentivise people to pursue a hopelessly skewed version of ‘efficiency’ – indeed, will incentivise them to gouge and cheat everyone they can, incentivise them to manipulate the political system against anyone who threatens profits, incentivise them to pander to wealthy 1st world consumers and neglect poor 3rd world consumers.

Moreover, those incentives apply only to ‘the economic agent’ – and where, as is often the case, that agent is a company, the incentivies of the actual people controlling that company will be even more perverse.

So, can those incentives be replaced?

Well, there’s a best-case scenario and a worst-case. The best case is that a cluster of incentives such as personal fulfillment, self-regard, altruism, group-egoism, lust for popularity, fear of contempt, will be strong enough, in most cases, to generate an open-ended incentive to ‘benefit the economy’ by whatever means are judged most suitable. This of course would have the by-product of reducing anti-social behaviour, whether that’s tax evasion, speculation, or drunk driving.

The worst-case scenario is that such open-ended incentives can’t take over all the slack, that people really do desire only ‘self-interest’ in some crude sense (power, comfort, something). All you have to do then is to work out more precisely what it is that pushes these buttons (a task for psychologists) and then offer it in small doses in the right structure.

Of course such a structure will need to be devised – but it already needs to be devised, to make companies work, to make every other organisation work. We need incentives, for example, to work so as to avoid groupthink, the tendency for rational individuals to be collectively irrational. We are so far from having an adequate psychology and organisational theory to deal with this issue that it’s not even funny.

And we can certainly provide people with differential material rewards without relying on market pricing. Just as workers councils can process the same widely-dispersed information as a market, they can assign values to different roles and types of work, based on a rational selection of factors (difficulty or unpleasantness of work, externalities, etc.) rather than the random subset that show up from the blinkered profit-directed outlook.

Thirdly, the price mechanism rations. And here, the critique is quite simple. Prices ration scarce goods according to a mixture of two factors – wealth and desire. Rationing by desire is entirely appropriate (if there’s only one, and I want it more than you do, I should get it) while rationing by wealth is disgustingly unfair.

In consequence, prices are a good rationing mechanism where the differences between the wealth of different individuals are non-existent or very small. That would probably imply (perhaps not necessarily) that the currency being used should be impermanent – you can’t save it up, you have a certain amount per week, if you don’t spend it it vanishes (a more gradual version of vanishing would be a sort of negative interest rate).

This, of course, is in the context of a currency exchanged only for consumer goods, not invested as capital for profit (sometimes called labour vouchers or labour notes). This in turn implies that when you pay for something, what you pay doesn’t go to the person working in the shop, it just goes back to the issuing collective.

So the possibly useful rationing function of prices requires taking them out of a market economy.

In conclusion, communism (democratic control of the economy by directly-democratic assemblies of various sizes) can reproduce all the supposed advantages of the price mechanism. I haven’t talked here so much about the distinctive harms of the price mechanism and of markets, because those are more often pointed out, but they’re certainly real.

21 Responses to “Functions of the Price Mechanism”

  1. Anarcho-pragmatiste Says:

    “understand by communism, a society not based on markets”

    Hummmm. I’m not sure with that. Maybe you should distinguish “market” and “capitalism”.

    http://francoistremblay.wordpress.com/2008/02/29/why-anarchists-must-be-pro-markets-and-anti-capitalism/

  2. Alderson Warm-Fork Says:

    I was just saying what I wanted to use the words for. There is a measure of variation in what people use these terms to mean, but the most sensible use of words, to me, is that ‘socialism’ is all those systems without private ownership of capital, and ‘communism’ goes further to abolish private ownership of everything. Ownership is defined in terms of a certain strong cluster of rights, not any particular right. Markets in a strong sense require general alienability of goods and a single currency into which all the goods on the market can be converted, so I’d see that as implying private ownership, i.e. not communism. Of course ‘market’ could be diluted or used in a weaker sense to cover a great range of things.

    None of this is to assume the superiority of communism over, say, market socialism, just to say that that was where I was coming from here.

  3. Anarcho-pragmatiste Says:

    “Markets in a strong sense require general alienability of goods and a single currency into which all the goods on the market can be converted, so I’d see that as implying private ownership, i.e. not communism. Of course ‘market’ could be diluted or used in a weaker sense to cove”

    Again, you should distinguish “property” or “private ownership” (endless in time) and “possession” (limited in time by occupation and use).

    Single currency is a capitalist mechanism, not a free market one.

  4. Anarcho-pragmatiste Says:

    I read this post again and this is a great critique of capitalism. Again, you should distinguish “market” and “capitalism” but your critique is relevant in substance.

    Excellent post!

  5. Alderson Warm-Fork Says:

    Hummmmm. I’m not sure. I think the post has two aims, really – principally it’s an attack on capitalism, but I think most of the points, with qualifications and adjustments, would also be relevant in a debate between mutualists, market socialists, and communists, and others. I have sympathy with, roughly speaking, mutualism and everything left of it, and under some circumstances markets would probably be vital or useful to anarchist societies, but I think communism, under the right conditions, is both possible and preferable, and that was partly what this post was intended to support.

    So I was in a sense discussing markets in general, though you’re right that it would probably be a good idea to more clearly distinguish markets and capitalism, since they are so often and so wrongly conflated.

    “Single currency is a capitalist mechanism, not a free market one.”
    I’m intrigued – could you elaborate on this?

  6. Anarcho-pragmatiste Says:

    To maintain a single currency, you have to maintain a state-control money. Thus, single currency a capitalist mechanism that couldn’t occur in a real free market system.

  7. Francois Tremblay Says:

    Alderson, I read your criticism of the price mechanism. You claimed to be addressing the price mechanism in mutualism but you haven’t. I saw nothing in there that addressed the left-libertarian price mechanism in general or in particular. You’re arguing against capitalism.

    I believe that a monetary system based on LTV is the only way of having a fair economic system. To me, communism doesn’t cut it.

  8. Alderson Warm-Fork Says:

    Ok, well I may have misunderstood mutualism then. In terms of the points in this post, which are about why the market/price mechanism isn’t as good as it’s cracked up to be, I’d pose the following questions:

    1. Why is a mutualist market better able to process information about demand and supply than a democratic planning structure – in particular, why does it not suffer from market problems around a. externalities, b. imperfect information, c. being open to manipulation by advertising etc., and d. being distorted in proportion to inequality of wealth?

    2. Why does a mutualist market not generate perverse incentives, such as a. to want others to be in need of your product, b. to conceal information about your product, c. to free-ride on public goods, and d. to undermine your competitors?

    3. Why does a mutualist market not ration things in an unfair way, in particular a. to the advantage of those born into supportive families and given lots of opportunities, b. to the disadvantage of the ill or disabled, c. to the disadvantage of those whose work is done partly out of emotional non-market motives (e.g. family caring work) and who thus can’t/don’t negotiate hard for ‘payment’ up to the full value of their work?

  9. Francois Tremblay Says:

    These are technical questions, and I am probably not the best person to answer them, but I’ll give you my opinion anyway.

    “1. Why is a mutualist market better able to process information about demand and supply than a democratic planning structure”

    There’s no issue of demand and supply, since price is determined by costs. The issue of what to produce and how to produce it is primarily determined by planning (as you would call it).

    “in particular, why does it not suffer from market problems around a. externalities, b. imperfect information, c. being open to manipulation by advertising etc., and d. being distorted in proportion to inequality of wealth?”

    a. I think externalities mostly persist because of rule or justice failure, which are generally the result of class interests or inequality in general. So that’s much less of a problem in an anarchist society, including a mutualist one.

    b. I think the distribution of information is to a large extent determined by the distribution of power (capacity to hide or stem the flow of information) and wealth (capacity to generate information).

    c. Without the profit motive, there is less incentive for advertising or manipulation in general. Furthermore, it seems likely to me that the people in control of means of communication will go towards less advertising as well.

    d. Since a mutualist system is egalitarian, that’s not an issue.

    “2. Why does a mutualist market not generate perverse incentives, such as a. to want others to be in need of your product, b. to conceal information about your product, c. to free-ride on public goods, and d. to undermine your competitors?”

    a. How is that a perverse incentive? Anyone who wants to trade anything wants others to be in need of what they have. That’s a perfectly natural desire.

    b. That would be an issue of either fraud or withdrawing information, the latter of which you already asked about.

    c. Not sure what you mean by “public goods.” I don’t believe in private or public control.

    d. Undermine how?

    “3. Why does a mutualist market not ration things in an unfair way, in particular a. to the advantage of those born into supportive families and given lots of opportunities, b. to the disadvantage of the ill or disabled, c. to the disadvantage of those whose work is done partly out of emotional non-market motives (e.g. family caring work) and who thus can’t/don’t negotiate hard for ‘payment’ up to the full value of their work?”

    a. I’m against the family structure, so you’re not gonna get an argument from me on that one.

    b. “But what about the ill and disabled” is a standard argument against any form of Anarchism, not just mutualism. I don’t see how mutualism is more vulnerable to it.

    c. Anyone must by definition receive the “full value of their work.” If they don’t, we’re not in a mutualist system.

  10. Alderson Warm-Fork Says:

    Ok, so a few specific comments:

    ““But what about the ill and disabled” is a standard argument against any form of Anarchism”
    But it makes no sense against communism: to each according to need etc. automatically provides for the ill and disabled as fully as you could want (both in terms of providing for them and in terms of enabling the sort of ‘minority rights’ approach that would design public environments to accessible to people with different, say, mobility.

    “Anyone must by definition receive the “full value of their work.” If they don’t, we’re not in a mutualist system.”
    This seems like a bit of a cop-out. A liberal can’t say ‘liberalism guarantees people the greatest practicable freedom – if it doesn’t, it’s not liberalism’. My point is just that it seems like the institutions meant to turn mutualism into a reality seem like they won’t always generate the pattern of rewards that it’s meant to.

    “I’m against the family structure, so you’re not gonna get an argument from me on that one.”
    My concern isn’t just about families, it’s that people will always have differential starting points, better or worse starts in life. Obviously we can’t do anything about that, but in a competitive system my concern is that this will allow people to compete more effectively and get richer, letting them compete even more effectively, etc. and so let inequality grow incrementally – though of course without either profit/rent/interest or family inheritance this would be much reduced.

    “Not sure what you mean by “public goods.””
    I mean non-rivalrous, non-excludable goods. http://en.wikipedia.org/wiki/Public_good

    “Undermine how?”
    In all the ways that human ingenuity can come up with, which laws will never be able to predict. Similarly for the incentive to want others to be in need – it’s perverse because their natural interest will tend to be toward satisfaction, not need, so it produces a conflict that could motivate antagonistic behaviour.

    And some general comments: you’re right that a lot of these problems are very sensitive to ‘politics’ – is there a coherent class interest or concentrated power that would allow manipulation in the given way? If not, they’re less serious.

    I am a little unclear on your earliest comments (illustrating my limited understanding of mutualism) – how is cost calculated if not based on supply? If so many decisions are made based on some sort of planning, what is the market’s function? Is it mainly informational, motivational, or rationing?

  11. Francois Tremblay Says:

    “But it makes no sense against communism: to each according to need etc. automatically provides for the ill and disabled as fully as you could want”

    Then now we’re entering in the same problem that you point out on the next entry as being a “cop-out.” I don’t see how a communist system would “automatically provide” for those in need. I agree that it is no less likely to do so, but not that it would do so “automatically.”

    “My point is just that it seems like the institutions meant to turn mutualism into a reality seem like they won’t always generate the pattern of rewards that it’s meant to.”

    If that’s true, then we need to think of better institutions, because it would mean that mutualism is not achievable. I’m more of the position that we need to restructure the whole monetary system, but I see no obvious flaw in Benjamin Tucker’s reasoning. If you do, I’d like to hear it.

    “My concern isn’t just about families, it’s that people will always have differential starting points, better or worse starts in life.”

    Why does that necessarily have to be the case?

    “Obviously we can’t do anything about that, but in a competitive system my concern is that this will allow people to compete more effectively and get richer, letting them compete even more effectively, etc. and so let inequality grow incrementally – though of course without either profit/rent/interest or family inheritance this would be much reduced.”

    Well yes, that’s the crux of the issue. If, like in Warren’s system, everyone was paid roughly equally in labour-hours and the currency system was structured around that fact, then I would see little reason to fear the growth of inequality. In fact I think it would be the fairest system possible.

    “I mean non-rivalrous, non-excludable goods. http://en.wikipedia.org/wiki/Public_good

    Ah, you mean it in the standard economic sense. I see. Most public goods are made that way by State intervention in the first place, and I don’t really see the rest as being particularly problematic (I destroy the concept of “market failure” as regards to public goods in my book).

    “In all the ways that human ingenuity can come up with, which laws will never be able to predict.”

    That’s a rather pessimistic view.

    “Similarly for the incentive to want others to be in need – it’s perverse because their natural interest will tend to be toward satisfaction, not need, so it produces a conflict that could motivate antagonistic behaviour.”

    I suppose some people might want other to be in need of something that isn’t really useful. The only question I have is, what is the incentive? They can do equally well selling something they know will sell, and they can’t make more money selling anything else.

    “And some general comments: you’re right that a lot of these problems are very sensitive to ‘politics’ – is there a coherent class interest or concentrated power that would allow manipulation in the given way? If not, they’re less serious.”

    All Anarchist systems are classless, so no. I don’t see any possibility for the creation of classes in a mutualist society, except perhaps for the rise of a governing class that comes about from the accretion of representative powers, but that risk exists in all Anarchist systems.

    “how is cost calculated if not based on supply?”

    If by “supply” you mean “how much of a product you want to produce” (supply and demand curves), then no. If by “supply” you mean “factors which exist only on the side of the producers,” then yes.

    “If so many decisions are made based on some sort of planning, what is the market’s function? Is it mainly informational, motivational, or rationing?”

    I’m not sure what each of these terms means exactly, but insofar as I know I’d say “all of these.” Prices convey information about costs, prices ration the acquisition of goods, and wages motivate people to produce (in a general way).

  12. Alderson Warm-Fork Says:

    “I don’t see how a communist system would “automatically provide” for those in need.”
    Well, if free access is the rule, and rationing of particularly scarce resources an exception, then it does follow fairly directly that when someone wants X, they can get X. Or rather, to leave those unable to work to starve would require an active political decision to apply specific rules to them, a deliberate vindictiveness. That’s different from a situation where wages/proceeds from sale of products is the base form of income, because then, people who aren’t making products have no income unless a deliberate decision is made to provide for them.

    “That’s a rather pessimistic view.”
    Not at all! It’s optimism about ingenuity and pessimism about law.

    “I suppose some people might want other to be in need of something that isn’t really useful. The only question I have is, what is the incentive? They can do equally well selling something they know will sell”
    This sounds a bit like ‘why would mammals enter the water if they can do equally well living on land?’ The incentive is that you can get money for it, and sometimes more money than in alternative ways.

    “Most public goods are made that way by State intervention in the first place”
    I’m a little sceptical about this, and it’s a fairly major issue in markets vs. non-market systems. Why, for example, is a vaccination campaign not a public good, i.e. one with a free-rider problem?

  13. Francois Tremblay Says:

    “Well, if free access is the rule, and rationing of particularly scarce resources an exception, then it does follow fairly directly that when someone wants X, they can get X. Or rather, to leave those unable to work to starve would require an active political decision to apply specific rules to them, a deliberate vindictiveness. That’s different from a situation where wages/proceeds from sale of products is the base form of income, because then, people who aren’t making products have no income unless a deliberate decision is made to provide for them.”

    I understand your argument, and it’s a powerful one. The trouble here is that you posit that free access is the rule to begin with, while there’s no reason that a similar decision couldn’t be made in any other system.

    “Not at all! It’s optimism about ingenuity and pessimism about law.”

    Since I don’t support any system of law, I guess I shouldn’t have answered in the way I did.

    “This sounds a bit like ‘why would mammals enter the water if they can do equally well living on land?’ The incentive is that you can get money for it, and sometimes more money than in alternative ways.”

    Yes, but you haven’t answered the question, why do it? Saying that you can make as much money isn’t a reason, since you can already make it with legitimate means.

    “I’m a little sceptical about this, and it’s a fairly major issue in markets vs. non-market systems. Why, for example, is a vaccination campaign not a public good, i.e. one with a free-rider problem?”

    Obviously anyone benefits from a certain level of vaccination, but the free rider aspect is indirect, in this case. There is still a direct benefit for an individual to get vaccinated.

  14. Alderson Warm-Fork Says:

    “The trouble here is that you posit that free access is the rule to begin with, while there’s no reason that a similar decision couldn’t be made in any other system.”

    Well, free access (as the general rule) is different from rationing (as the general rule), and money/labour notes/currency of whatever sort is a form of rationing. So to my mind, having free access as the general rule amounts to having no currency (and consequently no market) and I’d take that as partly definitional of communism.

    “you haven’t answered the question, why do it? Saying that you can make as much money isn’t a reason, since you can already make it with legitimate means.”
    Maybe you can get more money for the same amount of time or effort.

    “the free rider aspect is indirect, in this case. There is still a direct benefit for an individual to get vaccinated.”
    Well, yes, but all we have to do is suppose that there’s a cost (e.g. the price of the vaccine) and at a certain level it becomes individually more ‘economical’ for me to not get vaccinated and rely on other people’s immunity.

  15. Francois Tremblay Says:

    “Well, free access (as the general rule) is different from rationing (as the general rule), and money/labour notes/currency of whatever sort is a form of rationing. So to my mind, having free access as the general rule amounts to having no currency (and consequently no market) and I’d take that as partly definitional of communism.”

    Whoa there. “no currency and consequently no market”? Where did that come from? Surely you’re not serious.

    “Maybe you can get more money for the same amount of time or effort.”

    Then there’s a problem with the implementation, not with the theory.

    “Well, yes, but all we have to do is suppose that there’s a cost (e.g. the price of the vaccine) and at a certain level it becomes individually more ‘economical’ for me to not get vaccinated and rely on other people’s immunity.”

    … obviously. What I said doesn’t contradict that. I do understand that there is a free rider issue as long as there is a cost. But the cost exists in all systems. A collective might equally decide that they should devote less resources to vaccines and more to water quality, because they already have enough inoculations to ensure the general welfare.

  16. Alderson Warm-Fork Says:

    ““no currency and consequently no market”? Where did that come from?”

    What else do you trade in a market? What else are prices measured in?

    “Maybe you can get more money for the same amount of time or effort…Then there’s a problem with the implementation, not with the theory.”
    Um, why? In a market, if people buy my product, I get paid. Insofar as I am a market-minded person, I don’t care too much about why they buy it. I’m blind to that. Sometimes selling people something useful will be more lucrative than selling them something dangerous, sometimes it won’t. Sometimes persuading people that they want something unnecessary and then selling it to them will be more lucrative than taking advantage of a pre-existing need, sometimes it won’t. That will depend on what I’m good at and what’s selling, surely, not on the grand system?

    “But the cost exists in all systems. A collective might equally decide that they should devote less resources to vaccines”
    Ok, but the whole point of public goods is that at the collective level, the full effects of a certain level of immunity can be taken into account. Let’s say that an individual is monetarily better off, for some monetary ‘value’ of ‘not getting ill’, if there’s 30% vaccination but they’re not vaccinated. But the community is better off if there’s at least 70% vaccination. If individuals are making this decision in a market-minded way, you’re at risk of getting a dangerously low (30%) level. But the collective isn’t going to vote for that unless they’re stupid (and the problem for the market system arises regardless of anyone’s stupidity).

  17. Francois Tremblay Says:

    “What else do you trade in a market? What else are prices measured in?”

    That’s a silly question. Prices can be measured in anything.

    “That will depend on what I’m good at and what’s selling, surely, not on the grand system?”

    I’m not sure what point you’re making here. I thought that on this point we were talking about mutualism v communism?

    “Ok, but the whole point of public goods is that at the collective level, the full effects of a certain level of immunity can be taken into account. Let’s say that an individual is monetarily better off, for some monetary ‘value’ of ‘not getting ill’, if there’s 30% vaccination but they’re not vaccinated. But the community is better off if there’s at least 70% vaccination. If individuals are making this decision in a market-minded way, you’re at risk of getting a dangerously low (30%) level. But the collective isn’t going to vote for that unless they’re stupid (and the problem for the market system arises regardless of anyone’s stupidity).”

    Why would a market be more likely to produce a situation where vaccinations are “dangerously low”? It seems to me that that would only be true if vaccines were scarce. Because if the market sells at cost, like in a mutualist system, then the only difference between both scenarios is that more decisions are taken at the individual/organizational level and less decisions are taken at the social level.

  18. Alderson Warm-Fork Says:

    “That’s a silly question. Prices can be measured in anything.”
    Look, the point is, if something has a price, then I only get it if I pay the price, i.e. it serves to ration the good. If there’s prices (and not something different but related like ‘shadow prices’) then there’s rationing, hence not free access. Conversely, under communism there is generally free access, hence generally no rationing, hence generally no prices, hence generally no trade, hence generally no market. This being the difference between communism and market socialism.

    “I’m not sure what point you’re making here.”
    I’m making the point that it’s very likely that if I get paid for selling people something full stop, then some of the time I will get paid more for selling people something they don’t need. We can’t assume that more worthy sales will always be more lucrative than manipulative or cynical sales.

    “if the market sells at cost, like in a mutualist system, then the only difference between both scenarios is that more decisions are taken at the individual/organizational level and less decisions are taken at the social level.”
    Well, if externalities are always incorporated into the prices, i.e. they count costs to everyone equally, not just the buyer and seller, then yes, the problem disappears, because the market (as in, a collecton of self-interested individuals/firms operating independently) isn’t setting prices.

  19. Francois Tremblay Says:

    “Look, the point is, if something has a price, then I only get it if I pay the price, i.e. it serves to ration the good. If there’s prices (and not something different but related like ’shadow prices’) then there’s rationing, hence not free access. Conversely, under communism there is generally free access, hence generally no rationing, hence generally no prices, hence generally no trade, hence generally no market. This being the difference between communism and market socialism.”

    Uh yes, thank you for the lesson, but I already know that. All I’m saying is that communism does not escape costs. You still have to deal with costs in different ways.

    “I’m making the point that it’s very likely that if I get paid for selling people something full stop, then some of the time I will get paid more for selling people something they don’t need. We can’t assume that more worthy sales will always be more lucrative than manipulative or cynical sales.”

    None should be any more lucractive than their costs.

    “Well, if externalities are always incorporated into the prices, i.e. they count costs to everyone equally, not just the buyer and seller, then yes, the problem disappears, because the market (as in, a collecton of self-interested individuals/firms operating independently) isn’t setting prices.”

    I would think so, yes.


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