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Source link: http://archive.mises.org/5421/the-source-of-prices/

The Source of Prices

August 4, 2006 by

Ludwig von Mises explains: “Prices are a market phenomenon. They are generated by the market process and are the pith of the market economy. There is no such thing as prices outside the market. Prices cannot be constructed synthetically, as it were. The very idea of cost prices is unrealizable.” FULL ARTICLE

{ 2 comments }

ed August 4, 2006 at 2:31 pm

I think the common misunderstanding is that prices react differently for different products. If I bought a rare antique, the price I pay is whatever I am willing to pay. When I buy gasoline, I pay whatever the prices says (up to a point) Without getting into elasticity or slopes of demand curves, the bottom line is I am willing to pay much more for gas then what is available. Even though I “know” better, it feels like there was probably just as much gas today at $3 a gallon as there was last year at $2 a gallon. Did demand really drive it up that much higher? Obviously it did.

The reason for my “feelings” (and probably other common folk):

1. I see prices everyday in large numbers
2. It impacts my wallet weekly.
3. Unlike any one grocery, auto, or housing item, I buy gas constantly
4. When I complain about higher prices I receive lots of sympathy – that’s nice.
5. Unlike a local grocer, the prices put out by the oil companies are done by faceless (and therefore evil) corporations

When making a case for free pricing we shouldn’t forget the emotional aspect people apply to prices, especially gas prices. This doesn’t excuse any restriction on liberty of a seller to set prices. The logic and reason behind free pricing is as clear as can be. The argument put forward should focus emotionally on the importance of liberty.

anarkhos August 6, 2006 at 5:07 pm

The great myth prices propogate isn’t that prices reflect value, but that everyone could afford everything so long they had enough money.

I’ve been having an endless (sometimes heated) discussion with someone who’s convinced that the major problems of the world are caused by greedy corporations and the super-wealthy. I try making the point that the only way to increase standards of living is by greater production, but he doesn’t see it. To him, prices are just another tool of the corporate elite.

This isn’t some nut-job either. Look at the forums on gasbuddy.com:

http://www.oregongasprices.com/Forum_Topics.aspx?category=1056

Tens of thousands of economically illiterate posts. This is the mass ignorance the market has created. Try posting on this forum and you’ll feel like you’re in an insane asylum.

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