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Presenting The Pricing Players In a world-premier production of Prices
“Since we know that the key task facing any economy is the allocation of SRTHAU, the next question is: How does an economy do that?”
Prices No one person or bureaucracy -- whether in Moscow, Beijing, Tallahassee or Washington -- can possibly effectively coordinate all the millions of economic transaction that occur each minute in a complex society
Prices No one person or bureaucracy -- whether in Moscow, Beijing, Tallahassee or Washington -- can possibly effectively coordinate all the millions of economic transaction that occur each minute in a complex society Example of USSR food system compared to Britain’s
Prices No one person or bureaucracy -- whether in Moscow, Beijing, Tallahassee or Washington -- can possibly effectively coordinate all the millions of economic transaction that occur each minute in a complex society Example of USSR food system compared to Britain’s Gorbachev with “little understanding of economics” as leader of the biggest nation
Primary Roles of Prices Convey terms of financial transactions among consumers, producers, retailers, workers, landlord, etc.
Primary Roles of Prices Convey terms of financial transactions among consumers, producers, retailers, workers, landlord, etc. Prices help determine how much of each resource get used, where it gets used, and how the resulting products are distributed
Primary Roles of Prices Convey terms of financial transactions among consumers, producers, retailers, workers, landlord, etc. Prices help determine how much of each resource get used, where it gets used, and how the resulting products are distributed Provide incentives to affect behavior in the use of resources and their resulting products
Prices • Why does Dr. Sowell compare prices to the worldwide web?
Prices • Why does Dr. Sowell compare prices to the worldwide web? • Prices connect you to anyone, anywhere where prices operate freely
Prices • Why does Dr. Sowell compare prices to the worldwide web? • Prices connect you to anyone, anywhere where prices operate freely • Price-coordinated markets enable people to signal to other people how much they want and what they’re willing to pay
Prices • Why does Dr. Sowell compare prices to the worldwide web? • Prices connect you to anyone, anywhere where prices operate freely • Price-coordinated markets enable people to signal to other people how much they want and what they’re willing to pay • VW Jetta
Profits & Losses • Why are losses as important as profits to businesses in a free market economy?
Profits & Losses • Why are losses as important as profits to businesses in a free market economy? • Profits provide incentives to use scare resources more efficiently because decisions are guided by prices
Profits & Losses • Why are losses as important as profits to businesses in a free market economy? • Profits provide incentives to use scare resources more efficiently because decisions are guided by prices • Losses tell producers what to stop producing
Prices and Central Planning • Countries with socialist or Marxist economic systems rely on central planners to set prices and determine what goods are produced and where
Prices and Central Planning • Countries with socialist or Marxist economic systems rely on central planners to set prices and determine what goods are produced and where • Importantly: at no point in history can we find an example where central planning has consistently produced more prosperity than allowing prices to fluctuate via supply and demand
Growing U.S. Central Planning Health care reform (aka Obamacare) creates 159 new federal agencies
Growing U.S. Central Planning Health care reform (aka Obamacare) creates 159 new federal agencies Financial reform act (aka Dodd-Frank) creates dozens of new agencies to do everything from set credit card interest, ATM fees and dictate % of minorities/women in financial businesses
Growing U.S. central planning Health care reform (aka Obamacare) creates 159 new federal agencies Financial reform act (aka Dodd-Frank) creates dozens of new agencies to do everything from set credit card interest, ATM fees and dictate % of minorities/women in financial businesses All federal agencies such as EPA and SEC aggressively expanding regulations
“No matter how much we wish to organize everything rationally, without waste, no matter how passionately we wish to lay all the bricks of the economic structure tightly, with no chinks in the mortar, it is not yet within our power.” Nikolai Shmelev & Vladimir Popov USSR economists
Prices and Costs Prices become economic realities only if others are willing to pay them
Prices and Costs Prices become economic realities only if others are willing to pay them Not up to us to decide prices
Prices and Costs Prices become economic realities only if others are willing to pay them Not up to us to decide prices Up to other producers selling same goods and services and what others are willing to pay
Do high prices reflect greed? Competition is what limits what you can charge and still make sales
Do high prices reflect greed? Competition is what limits what you can charge and still make sales Alex Rodriquez, New York Yankees $231 million in earnings so far
Do high prices reflect greed? Competition is what limits what you can charge and still make sales Alex Rodriquez, New York Yankees, $231 million in earnings so far Retail clerk: $15,000-$20,000 year
Do high prices reflect greed? Competition is what limits what you can charge and still make sales Alex Rodriquez, New York Yankees, $231 million in earnings so far Retail clerk: $15,000-$20,000 year What news do those figures bring us?
