I feel that prices are very complicated, for two reasons. First, the price of any good is determined by all of the costs involved in producing the good, as well as the characteristics of the...
Exemplary
I feel that prices are very complicated, for two reasons.
First, the price of any good is determined by all of the costs involved in producing the good, as well as the characteristics of the market (e.g. monopolies can charge higher mark-up), and the motives of the seller (e.g. business may be selling at low price to grow market share, or selling at a higher price to build more profit to invest back in business for next year). Thus from an information-theoretic perspective, prices are lossy, because they take a whole bunch of numbers and reduce them to a single number.
Second, prices are not just a signal of availability, they are also a form of access control, and they determine who is allowed to access a good based on their available capital, something I have discussed in my previous essay on money. The article touches on this in its 'Broken Pipeline' example:
Who would pay 2x, 3x, or 4x as much money for the gasoline? It could be some wealthy people, or some essential businesses who need gasoline to operate and are still profitable at these levels. Maybe you or your wife are pregnant, due to deliver within a week or two, and you want some gasoline in your car in advance regardless of price so that you can get to the hospital when you need to. There are all sorts of reasons why some people might need it more than others and have the means to get it.
Emphasis mine. The increasing price signals that there is a reduced availability of gasoline, but the problem of distributive justice -- who is able to access a scarce resource -- is solved independently of the price, via the wealth distribution. In this scenario it is plausible to me that there would be pregnant people who are unable to pay for the gas to get to the hospital, while some wealthy people are able to buy as much gas as they want for cruising around in their Bentleys. Is this just? Is this fair?
In all of the examples given in the article, prices are signals, and quantities are the drivers behind the changes in price signals. I wonder if a socialist economy could function directly on quantity signals instead of price signals, i.e. instead of trying to price a good, we just advertise the amount we currently have available, possibly with other information like the quantities of individual inputs. I can think of at least two changes this would bring.
First, it provides strictly more information to the market. If the pipeline breaks, instead of raising a price, just tell the consumers what your new daily throughput of oil is. Refineries which work with that pipeline will now know exactly how much less gasoline they can produce, and they can then tell their consumers what their new output is, and so on. Previously, a higher price travelled downstream to indicate a reduced supply, whereas in this model, a lower quantity travels downstream. If companies are transparent about their inputs and outputs and publish these somewhere, it becomes very easy to determine the effect of a demand or supply shock on large areas of the economy, because we are now modelling the economy as what it actually is: a system of stocks and flows of different goods. For scenarios like the 'Underpaid Truckers' example, I think this would make solving the problem much more obvious, because everyone in the system can immediately 'see' from the quantity signals that we need more logistics throughput. With prices, because all of the inputs are reduced into a single number, and because different firms do not publish the prices they pay for their inputs, what should be global information about an economic flow, becomes local information, with only the logistics firms and their customers able to determine that there is a shortage of truck drivers from the price signal and demand between them.
Second, using quantities directly forces us to consider issues of distributive justice. If there is a shortage of a good, we can no longer just raise the price and pretend all is well. In a socialist economy, where all people have the same right of access to a scare resource, we have to deliberately construct a distribution mechanism which we believe is fair, and furthermore we have the flexibility to use different distribution mechanisms for different goods, instead of relying on a single wealth/cash distribution for determining who has access to what. Governments already do this to some extent with subsidies. For example, in the UK we have a Winter Fuel Payment, where the government gives a cash transfer to people over a certain age for them to use on their heating bills during the winter months. This is a way to increase the purchasing power of a particular demographic for a particular good, but rather that prioritising supply to these customers directly (e.g. distribute gas to homes by age of oldest resident, descending), because we use money and prices, the government have to create a (ring-fenced) cash transfer programme, funded by taxes.
The 'opening up' of distributive justice in this way is potentially dangerous as it could devolve in to mob rule if not implemented properly. If every firm has the right to determine how they distribute their goods, we would end up with many more 'gay cake' rows and an economy which is incredibly difficult to navigate. However, having a single wealth distribution which determines access to all goods also seems like a bad idea, because different goods are heterogeneous and provide different value to different demographics; because it allows those who already have wealth to accumulate more of it, which widens inequalities; and because it allows the wealthy to exert undue influence over democratic processes and other areas of life which should exist independently of markets and wealth.
All of the econ literature I've come across talks about price signals like they are this amazing invention which we would be foolish to abandon, yet they neglect to mention that they are just one signalling mechanism and that they are intimately tied to a cash-based market economy. It seems very clear to me that money is just an abstraction that we have layered on top of our economy, and that the real economy is a system of stocks and flows of resources. I have yet to find any econ literature which takes this systems theoretic perspective as its basis, and then builds out supply and demand, price signals, etc. from that grounding. If anyone has any texts like this, please recommend them!
Thanks for the detailed response. In general, I agree that using price as a signal of costs is imperfect, and sometimes it needs to be combined with other things. (Stores sometimes limit the...
Thanks for the detailed response. In general, I agree that using price as a signal of costs is imperfect, and sometimes it needs to be combined with other things. (Stores sometimes limit the number of items per customer, for example.)
However, I think the "lossy" aspect of it is in some ways an advantage, because a simple rule makes it much easier to shop. Ideally, if prices were "correct" then you could choose the lowest-price item that meets your needs. Anything less lossy is going to result in a more complicated decision than just comparing numbers.
For example, sometimes there are labels. Is it organic? Fair trade? Union made? Those labels are also binary simplifications of a complicated supply chain, and not everyone looks for them.
I do think that sophisticated buyers could handle more complexity. When buying electronic components from a distributor like Digikey, I see tables with hundreds of columns and the price is one of them. A couple more columns probably won't hurt. But for the average consumer, I think that making prices "correct" (whatever that means) has a lot to be said for it.
You are also entirely right that in a very unequal society, using prices to decide who gets what is inherently unfair. (In fact many well-off people don't even look at prices all that carefully for small stuff like groceries.) Theoretically I think that would be better fixed with something like universal basic income. In practice we end up with complicated systems of subsidies and gatekeeping and congestion that are also often unfair. (In particular I think giving people unrestricted funds is often better than things like winter fuel payment.)
Regarding quantity, I'm not sure how that helps. How does a shopper take into account quantity available when deciding how much gas to buy? Telling them industrial metrics like the flow through a pipeline isn't going to be meaningful to them.
I do think metrics like this could make Internet discussion around supply chain issues better. Most people don't know whether Los Angeles is shipping more or fewer containers than before. With the pandemic there are lots of charts. We can argue over what the numbers mean, but at least we have them, sometimes.
Yes, not everyone cares about these labels, and as you say they are also simplifications. Sometimes there are also a lot of regulations involved in getting those certifications and consumers don't...
However, I think the "lossy" aspect of it is in some ways an advantage, because a simple rule makes it much easier to shop. Ideally, if prices were "correct" then you could choose the lowest-price item that meets your needs. Anything less lossy is going to result in a more complicated decision than just comparing numbers.
For example, sometimes there are labels. Is it organic? Fair trade? Union made? Those labels are also binary simplifications of a complicated supply chain, and not everyone looks for them.
Yes, not everyone cares about these labels, and as you say they are also simplifications. Sometimes there are also a lot of regulations involved in getting those certifications and consumers don't even know what they mean exactly. Some labels like organic are misconstrued as indicating quality, or just provide an outlet for conspicuous consumption.
Consumer product labelling is also not always a good thing, like calorie labelling of menu items in restaurants. This can be very damaging for people with (latent) eating disorders, but personally I find it very useful and informative. Clearly there are user experience and social justice angles to consider with labelling consumer goods
But for the average consumer, I think that making prices "correct" (whatever that means) has a lot to be said for it.
As indicated by our discussion on consumer product labelling, I don't think there is a single 'correct' price for a good, I think it is determined by the subjective values of individual consumers, suppliers, and also our society and culture. Externalities demonstrate this nicely. Consider the carbon/emissions intensity of certain goods, which is usually not factored in to the price at all. We may be able to introduce a Pigouvian tax to 'internalise' this externality (this is what the Zero Carbon campaign is trying to achieve in the UK) and incorporate this in to the price. It's definitely something myself and a lot of other people care about, and as the ethics of our society continue to move towards climate justice, I believe (or at least hope) that carbon taxes will be levied on all goods.
Suppliers can of course choose to opt-in to internalising other factors of production into their prices, such as paying to offset the carbon of their business and then raising unit prices to cover this cost. But then consumers are faced with a choice between two goods, one of which is more expensive, so which are they going to choose? Brands will market their goods to appeal to certain demographics or 'tribes' and to demonstrate eco-friendly credentials or any other features of their business which affect the price of their goods, in an attempt to get consumers to pay more. But now the consumer is at the mercy of the company's marketing, which is probably not very transparent and doesn't provide strong evidence (you say your avocados are zero carbon but what does that mean? what are you actually doing to make them zero carbon?).
Theoretically I think that would be better fixed with something like universal basic income.
Yes, I love the simplicity of UBI and I hope to see it widely deployed in my lifetime. :) UBI could solve the problem of access to basic goods if it is set at the right level and this is maintained properly: everyone should be able to afford some kind of accommodation and a nutritious diet at an absolute minimum. If it's deployed appropriately it may be sufficient to reduce homelessness, by allowing people who are unemployed and homeless to be able to afford accommodation, which as demonstrated by Housing First programmes, is a effective first step in helping people to escape homelessness for good, work on other issues like mental health and substance use, and getting them set up with a job, bank account, etc.
Regarding quantity, I'm not sure how that helps. How does a shopper take into account quantity available when deciding how much gas to buy? Telling them industrial metrics like the flow through a pipeline isn't going to be meaningful to them.
Individual consumers don't care about quantity as long as they can access the quantity they want to consume, but it does help a distributor determine how they should distribute the good to a set of consumers. When shops think that consumers are liable to panic buy, like in a pandemic, they start to ration supplies of essential goods like toilet roll, "max two per person", but most of the time there is nothing stopping a consumer going into a shop and clearing the shelves. In my experience that problem doesn't happen very much, but I think it's an important conversation for our society to have: what is distributive justice, and how do we want our economy to function?
You want to separate allocation and price, so the seller's price continues to gate keep, but affluent buyers' additional wealth doesn't gate keep because anyone with the means has an equal...
You want to separate allocation and price, so the seller's price continues to gate keep, but affluent buyers' additional wealth doesn't gate keep because anyone with the means has an equal opportunity to purchase what they need.
You use an example of a shortage where individuals determine their need and adjust their spending appropriately; your system ensures equal allocation.
This, to my mind, is generally something the free market excells at in the long run. Maybe rationing can prevent affluent buyers from buying too much. But in general the free market adjusts to meet demand. Prices change to capture the greatest profit, which is the balance of price and customer base. Aside from impoverished, individuals can generally buy what they need, and prices tend to lower unless demand changes or when anticompetitive monopolies form. In certain disruptions to supply chain, people can't get access to what they need, like potable water. But this seems like a logistics issue and not a price issue.
Even mechanisms like coupons and sales exist to capture segments of markets that would have been priced out of a purchase but have need enough to use coupons or wait for sales.
So it seems like you are advocating for:
transparent logistics, rather than keeping such information secret/proprietary because it carries a market advantage. I like this a lot, although you should consider that this data is obviously valuable and is collected and presented at some expense. Tracking and data on shipping, which is extremely useful, is a really recent development and is continuing to advance.
rationing. I mean, sure? But I wonder how frequently this is required. And any system works with imperfect information and will have gaps, especially in the short run where this is more critical.
I think UBI is a good approach to the poverty side of things, and helping ensure each individual at least has the means to buy what they need. I guess the opportunity to buy could be improved, but yeah. That is pretty much the selling point of the free market, IMO.
Yes, my understanding of sales and coupons is that they allow suppliers to achieve a higher surplus by using multiple prices. e.g. instead of selling to 10 people at $5/unit and obtaining $50...
Even mechanisms like coupons and sales exist to capture segments of markets that would have been priced out of a purchase but have need enough to use coupons or wait for sales.
Yes, my understanding of sales and coupons is that they allow suppliers to achieve a higher surplus by using multiple prices. e.g. instead of selling to 10 people at $5/unit and obtaining $50 revenue, I could sell to 5 people at $6/unit (these people have a higher willingness-to-pay), and then do a sale at $5/unit to sell to the remaining 5, which would net me $55 revenue instead.
However, I don't know if this is applicable in a socialist context. In a socialist economy, there might be no 'prices', or we might model the willingness-to-sell as $0, so all consumers would immediately consume what they wanted.
transparent logistics, rather than keeping such information secret/proprietary because it carries a market advantage. I like this a lot, although you should consider that this data is obviously valuable and is collected and presented at some expense. Tracking and data on shipping, which is extremely useful, is a really recent development and is continuing to advance.
Not just logistics, but transparency of all inputs: how much does the flour cost for the bread? who supplies it? what kind of flour is it? I want maximum global information. Unfortunately I don't think this would ever work under capitalism, because there are many incentives for keeping this information private. For example, a supplier of flour may want to negotiate separate contracts with different bread-makers in order to maximise its revenue, but if all the bread-makers published the prices they bought flour at, then this would affect the prices: some bread-makers will feel over-charged and ask the flour supplier for a lower price, and some bread-makers will feel under-charged and that they may now lose surplus if the flour supplier decides to increase what it charges them. So I think the incentives for a completely transparent economy are greater in a socialist system than a capitalist system.
rationing. I mean, sure? But I wonder how frequently this is required. And any system works with imperfect information and will have gaps, especially in the short run where this is more critical.
Not necessarily rationing, that's just one way a more deliberate distribution mechanism could look like in the face of certain levels of scarcity. Consider the following example. Two consumers, A is poor and hasn't eaten all day, B is wealthy and well-fed. If bread costs $2, perhaps A can't afford it but B can, although clearly A needs it and B doesn't, so this is a market failure. If bread is free but there is rationing, maybe A can get some bread but not enough, and B can get some bread but it doesn't matter how much they need since they are not hungry, so this is also a failure. However, perhaps we order the schedule of goods by how hungry people are, we could have a scenario where bread is free, but A gets 'first dibs' on however much bread they need/want, and then B can choose from the leftover bread. This seems optimal to me because now both consumers are satisfied.
Logistics wise, I do think global information transparency is interesting. Still, reality needs to account for the practicality of collecting, parsing, and disseminating useful data. And so much...
Logistics wise, I do think global information transparency is interesting. Still, reality needs to account for the practicality of collecting, parsing, and disseminating useful data.
And so much could influence the price of flour; just the transportation costs would fluctuate with gas prices and run-to-run variation in transport time. Is trying to map prices exactly to the lowest possible across different regions this essential, or is it bikeshedding? I think the market as it exists does fine even when some flour producers capture a greater profit; if it was unsustainable no-one would be buying their flour. Instead, an individual being unable to buy bread, or enough bread, is a sign of more systemic issues not linked to the capturing of small margins at various points of the supply chain.
I know the bread is hypothetical, but I don't really get your complaint, beyond "it isn't 100% efficient at delivering the lowest possible selling prices". Also, even if bakers see that other bakers are buying flour cheaper, their seller may not be able to match that price anyway. There are also price cuts for preffered customers because they have regular and consistent flour purchases that help the producer avoid shortage or surplus and thus can lower the price to that baker.
For the distribution of goods, you are correct that your version is more efficient. The problem is do you have a better system than the free market at solving this problem? I remain highly skeptical, because this is one of the problems the free market is best at solving; a concerted from-the-top approach to dictating resource allocation has been tried in every socialist country and has never succeeded; policy making has never been able to beat billions of localized microeconomic decisions from free agents trying to optimize their expenses* and run profitable or successful lives.
*Edit: optimizing their expenses to the extent they choose to. If someone doesn't care about the price of toilet paper, they don't have to. Could it be easier for a buyer to know if "the price is right" for that toilet paper? Yes. And we constantly see improvements and more transparency in this arena, which should make you happy.
I'll try to read the rest of your comment, but real quick, you have coupons and sales wrong. Sellers do not want to increase surplus, just like they do not want shortage. If a product is listed...
I'll try to read the rest of your comment, but real quick, you have coupons and sales wrong. Sellers do not want to increase surplus, just like they do not want shortage.
If a product is listed for $5 and has a market of 10 buyers, this includes everyone who would pay more then $5.
But there is an uncaptured market who would pay less than $5, and putting out coupons or sales gives a chance to capture some of those buyers at a reduced margin. This is still attractive because it is better to sell at a reduced margin than not sell. This is also why items in shortage typically don't revieve sales.
So while you could look at it as "we can still sell some of these for $6 as long as we have a sale at $5", this is wrong. You always want your regular price to fit to the largest profit, rather than somewhat higher, because coupons and sales aren't going to be used by every buyer. Of those buyers who would have payed $5 rather than $6, how many will use the sale or coupon? This is why they are mechanism to capture the sub-$5 market instead; whatever you manage to sell is strictly a bonus, especially if the store needs to get product off a shelf.
I don't see how this works because "how hungry are you" is private information. Nobody would want a system to be tracking how much you ate before the current meal. More generally, I think more...
I don't see how this works because "how hungry are you" is private information. Nobody would want a system to be tracking how much you ate before the current meal.
More generally, I think more supply chain transparency would be improve things (basically, what's getting shipped and what's in warehouses) but more tracking of people's consumption seems bad.
Shared for the basic concept; I’m not sure that historical price charts can be interpreted as easily as she makes it sound. It might be interesting to compare a carbon tax to the increase in...
Shared for the basic concept; I’m not sure that historical price charts can be interpreted as easily as she makes it sound.
It might be interesting to compare a carbon tax to the increase in gasoline prices we saw this year. Both of them cause consumers to cut back where they can and improve efficiency. However, the increase in oil prices also encourages oil producers, while a carbon tax won’t do that.
But I find that when I tell people that higher gas prices are actually good, environmentally speaking, they don’t appreciate it. I think this means we probably aren’t going to see significant carbon taxes.
Less a comment on tfa than side note on gasoline: I realized that if agw is real, we are absolutely toast a few years ago when I went to a Bill Mckibbon lecture. Of maybe 1000 in attendance, less...
Less a comment on tfa than side note on gasoline:
I realized that if agw is real, we are absolutely toast a few years ago when I went to a Bill Mckibbon lecture. Of maybe 1000 in attendance, less than 10 rode bikes, most drove cars, mostly with them only inside, and a significant percentage were driving less than 2 miles.
I mean, if the people attending a bill McKibbon lecture can’t be arsed to change even their leisure time gas expending habit, what hope is there really?
Maybe, for the more affluent. Probably everyone there would prefer electric. But simply trading every ice for electric is insufficient to stop, let alone reverse, agw. I don’t know, and in a way...
Maybe, for the more affluent. Probably everyone there would prefer electric. But simply trading every ice for electric is insufficient to stop, let alone reverse, agw.
I don’t know, and in a way it doesn’t matter, whether replacing cars with bikes, even for leisure trips, would solve the problem. I doubt it. But i know it would make a dent, and if very few are willing to make substantial individual changes it will be nigh on impossible to make society-level changes. Again, what’s alarming and disappointing is that these were people who proclaim a deep interest and u derstanding of agw. I wouldn’t expect attendees at a Biden rally to be making these kind of changes.
I certainly hoped you came around on the "if agw is real" bit. It is, undeniably so. I do aggree with your assessment that we're more or less doomed though. Climate catastrophy denialism has...
I certainly hoped you came around on the "if agw is real" bit. It is, undeniably so. I do aggree with your assessment that we're more or less doomed though.
I don’t know why i don’t why I included that phrase. I haven’t the slightest doubt and haven’t since like 1990. I did believe, up to that point, that there was hope. I knew entrenched interests...
I don’t know why i don’t why I included that phrase. I haven’t the slightest doubt and haven’t since like 1990.
I did believe, up to that point, that there was hope. I knew entrenched interests and regular folk would be slow to understand and respond, but my heart sank at this lecture. When even the supposed true believers act without purpose or urgency, what hope is there?
Thanks for clarifying. The fact that doing so was neccessary context just shows how bad the current state of affairs is. For reference, this is what came up when I searched for "agw" as a...
Thanks for clarifying. The fact that doing so was neccessary context just shows how bad the current state of affairs is.
I feel that prices are very complicated, for two reasons.
First, the price of any good is determined by all of the costs involved in producing the good, as well as the characteristics of the market (e.g. monopolies can charge higher mark-up), and the motives of the seller (e.g. business may be selling at low price to grow market share, or selling at a higher price to build more profit to invest back in business for next year). Thus from an information-theoretic perspective, prices are lossy, because they take a whole bunch of numbers and reduce them to a single number.
Second, prices are not just a signal of availability, they are also a form of access control, and they determine who is allowed to access a good based on their available capital, something I have discussed in my previous essay on money. The article touches on this in its 'Broken Pipeline' example:
Emphasis mine. The increasing price signals that there is a reduced availability of gasoline, but the problem of distributive justice -- who is able to access a scarce resource -- is solved independently of the price, via the wealth distribution. In this scenario it is plausible to me that there would be pregnant people who are unable to pay for the gas to get to the hospital, while some wealthy people are able to buy as much gas as they want for cruising around in their Bentleys. Is this just? Is this fair?
In all of the examples given in the article, prices are signals, and quantities are the drivers behind the changes in price signals. I wonder if a socialist economy could function directly on quantity signals instead of price signals, i.e. instead of trying to price a good, we just advertise the amount we currently have available, possibly with other information like the quantities of individual inputs. I can think of at least two changes this would bring.
First, it provides strictly more information to the market. If the pipeline breaks, instead of raising a price, just tell the consumers what your new daily throughput of oil is. Refineries which work with that pipeline will now know exactly how much less gasoline they can produce, and they can then tell their consumers what their new output is, and so on. Previously, a higher price travelled downstream to indicate a reduced supply, whereas in this model, a lower quantity travels downstream. If companies are transparent about their inputs and outputs and publish these somewhere, it becomes very easy to determine the effect of a demand or supply shock on large areas of the economy, because we are now modelling the economy as what it actually is: a system of stocks and flows of different goods. For scenarios like the 'Underpaid Truckers' example, I think this would make solving the problem much more obvious, because everyone in the system can immediately 'see' from the quantity signals that we need more logistics throughput. With prices, because all of the inputs are reduced into a single number, and because different firms do not publish the prices they pay for their inputs, what should be global information about an economic flow, becomes local information, with only the logistics firms and their customers able to determine that there is a shortage of truck drivers from the price signal and demand between them.
Second, using quantities directly forces us to consider issues of distributive justice. If there is a shortage of a good, we can no longer just raise the price and pretend all is well. In a socialist economy, where all people have the same right of access to a scare resource, we have to deliberately construct a distribution mechanism which we believe is fair, and furthermore we have the flexibility to use different distribution mechanisms for different goods, instead of relying on a single wealth/cash distribution for determining who has access to what. Governments already do this to some extent with subsidies. For example, in the UK we have a Winter Fuel Payment, where the government gives a cash transfer to people over a certain age for them to use on their heating bills during the winter months. This is a way to increase the purchasing power of a particular demographic for a particular good, but rather that prioritising supply to these customers directly (e.g. distribute gas to homes by age of oldest resident, descending), because we use money and prices, the government have to create a (ring-fenced) cash transfer programme, funded by taxes.
The 'opening up' of distributive justice in this way is potentially dangerous as it could devolve in to mob rule if not implemented properly. If every firm has the right to determine how they distribute their goods, we would end up with many more 'gay cake' rows and an economy which is incredibly difficult to navigate. However, having a single wealth distribution which determines access to all goods also seems like a bad idea, because different goods are heterogeneous and provide different value to different demographics; because it allows those who already have wealth to accumulate more of it, which widens inequalities; and because it allows the wealthy to exert undue influence over democratic processes and other areas of life which should exist independently of markets and wealth.
All of the econ literature I've come across talks about price signals like they are this amazing invention which we would be foolish to abandon, yet they neglect to mention that they are just one signalling mechanism and that they are intimately tied to a cash-based market economy. It seems very clear to me that money is just an abstraction that we have layered on top of our economy, and that the real economy is a system of stocks and flows of resources. I have yet to find any econ literature which takes this systems theoretic perspective as its basis, and then builds out supply and demand, price signals, etc. from that grounding. If anyone has any texts like this, please recommend them!
Thanks for the detailed response. In general, I agree that using price as a signal of costs is imperfect, and sometimes it needs to be combined with other things. (Stores sometimes limit the number of items per customer, for example.)
However, I think the "lossy" aspect of it is in some ways an advantage, because a simple rule makes it much easier to shop. Ideally, if prices were "correct" then you could choose the lowest-price item that meets your needs. Anything less lossy is going to result in a more complicated decision than just comparing numbers.
For example, sometimes there are labels. Is it organic? Fair trade? Union made? Those labels are also binary simplifications of a complicated supply chain, and not everyone looks for them.
I do think that sophisticated buyers could handle more complexity. When buying electronic components from a distributor like Digikey, I see tables with hundreds of columns and the price is one of them. A couple more columns probably won't hurt. But for the average consumer, I think that making prices "correct" (whatever that means) has a lot to be said for it.
You are also entirely right that in a very unequal society, using prices to decide who gets what is inherently unfair. (In fact many well-off people don't even look at prices all that carefully for small stuff like groceries.) Theoretically I think that would be better fixed with something like universal basic income. In practice we end up with complicated systems of subsidies and gatekeeping and congestion that are also often unfair. (In particular I think giving people unrestricted funds is often better than things like winter fuel payment.)
Regarding quantity, I'm not sure how that helps. How does a shopper take into account quantity available when deciding how much gas to buy? Telling them industrial metrics like the flow through a pipeline isn't going to be meaningful to them.
I do think metrics like this could make Internet discussion around supply chain issues better. Most people don't know whether Los Angeles is shipping more or fewer containers than before. With the pandemic there are lots of charts. We can argue over what the numbers mean, but at least we have them, sometimes.
Yes, not everyone cares about these labels, and as you say they are also simplifications. Sometimes there are also a lot of regulations involved in getting those certifications and consumers don't even know what they mean exactly. Some labels like organic are misconstrued as indicating quality, or just provide an outlet for conspicuous consumption.
Consumer product labelling is also not always a good thing, like calorie labelling of menu items in restaurants. This can be very damaging for people with (latent) eating disorders, but personally I find it very useful and informative. Clearly there are user experience and social justice angles to consider with labelling consumer goods
As indicated by our discussion on consumer product labelling, I don't think there is a single 'correct' price for a good, I think it is determined by the subjective values of individual consumers, suppliers, and also our society and culture. Externalities demonstrate this nicely. Consider the carbon/emissions intensity of certain goods, which is usually not factored in to the price at all. We may be able to introduce a Pigouvian tax to 'internalise' this externality (this is what the Zero Carbon campaign is trying to achieve in the UK) and incorporate this in to the price. It's definitely something myself and a lot of other people care about, and as the ethics of our society continue to move towards climate justice, I believe (or at least hope) that carbon taxes will be levied on all goods.
Suppliers can of course choose to opt-in to internalising other factors of production into their prices, such as paying to offset the carbon of their business and then raising unit prices to cover this cost. But then consumers are faced with a choice between two goods, one of which is more expensive, so which are they going to choose? Brands will market their goods to appeal to certain demographics or 'tribes' and to demonstrate eco-friendly credentials or any other features of their business which affect the price of their goods, in an attempt to get consumers to pay more. But now the consumer is at the mercy of the company's marketing, which is probably not very transparent and doesn't provide strong evidence (you say your avocados are zero carbon but what does that mean? what are you actually doing to make them zero carbon?).
Yes, I love the simplicity of UBI and I hope to see it widely deployed in my lifetime. :) UBI could solve the problem of access to basic goods if it is set at the right level and this is maintained properly: everyone should be able to afford some kind of accommodation and a nutritious diet at an absolute minimum. If it's deployed appropriately it may be sufficient to reduce homelessness, by allowing people who are unemployed and homeless to be able to afford accommodation, which as demonstrated by Housing First programmes, is a effective first step in helping people to escape homelessness for good, work on other issues like mental health and substance use, and getting them set up with a job, bank account, etc.
Individual consumers don't care about quantity as long as they can access the quantity they want to consume, but it does help a distributor determine how they should distribute the good to a set of consumers. When shops think that consumers are liable to panic buy, like in a pandemic, they start to ration supplies of essential goods like toilet roll, "max two per person", but most of the time there is nothing stopping a consumer going into a shop and clearing the shelves. In my experience that problem doesn't happen very much, but I think it's an important conversation for our society to have: what is distributive justice, and how do we want our economy to function?
You want to separate allocation and price, so the seller's price continues to gate keep, but affluent buyers' additional wealth doesn't gate keep because anyone with the means has an equal opportunity to purchase what they need.
You use an example of a shortage where individuals determine their need and adjust their spending appropriately; your system ensures equal allocation.
This, to my mind, is generally something the free market excells at in the long run. Maybe rationing can prevent affluent buyers from buying too much. But in general the free market adjusts to meet demand. Prices change to capture the greatest profit, which is the balance of price and customer base. Aside from impoverished, individuals can generally buy what they need, and prices tend to lower unless demand changes or when anticompetitive monopolies form. In certain disruptions to supply chain, people can't get access to what they need, like potable water. But this seems like a logistics issue and not a price issue.
Even mechanisms like coupons and sales exist to capture segments of markets that would have been priced out of a purchase but have need enough to use coupons or wait for sales.
So it seems like you are advocating for:
transparent logistics, rather than keeping such information secret/proprietary because it carries a market advantage. I like this a lot, although you should consider that this data is obviously valuable and is collected and presented at some expense. Tracking and data on shipping, which is extremely useful, is a really recent development and is continuing to advance.
rationing. I mean, sure? But I wonder how frequently this is required. And any system works with imperfect information and will have gaps, especially in the short run where this is more critical.
I think UBI is a good approach to the poverty side of things, and helping ensure each individual at least has the means to buy what they need. I guess the opportunity to buy could be improved, but yeah. That is pretty much the selling point of the free market, IMO.
Yes, my understanding of sales and coupons is that they allow suppliers to achieve a higher surplus by using multiple prices. e.g. instead of selling to 10 people at $5/unit and obtaining $50 revenue, I could sell to 5 people at $6/unit (these people have a higher willingness-to-pay), and then do a sale at $5/unit to sell to the remaining 5, which would net me $55 revenue instead.
However, I don't know if this is applicable in a socialist context. In a socialist economy, there might be no 'prices', or we might model the willingness-to-sell as $0, so all consumers would immediately consume what they wanted.
Not just logistics, but transparency of all inputs: how much does the flour cost for the bread? who supplies it? what kind of flour is it? I want maximum global information. Unfortunately I don't think this would ever work under capitalism, because there are many incentives for keeping this information private. For example, a supplier of flour may want to negotiate separate contracts with different bread-makers in order to maximise its revenue, but if all the bread-makers published the prices they bought flour at, then this would affect the prices: some bread-makers will feel over-charged and ask the flour supplier for a lower price, and some bread-makers will feel under-charged and that they may now lose surplus if the flour supplier decides to increase what it charges them. So I think the incentives for a completely transparent economy are greater in a socialist system than a capitalist system.
Not necessarily rationing, that's just one way a more deliberate distribution mechanism could look like in the face of certain levels of scarcity. Consider the following example. Two consumers, A is poor and hasn't eaten all day, B is wealthy and well-fed. If bread costs $2, perhaps A can't afford it but B can, although clearly A needs it and B doesn't, so this is a market failure. If bread is free but there is rationing, maybe A can get some bread but not enough, and B can get some bread but it doesn't matter how much they need since they are not hungry, so this is also a failure. However, perhaps we order the schedule of goods by how hungry people are, we could have a scenario where bread is free, but A gets 'first dibs' on however much bread they need/want, and then B can choose from the leftover bread. This seems optimal to me because now both consumers are satisfied.
Logistics wise, I do think global information transparency is interesting. Still, reality needs to account for the practicality of collecting, parsing, and disseminating useful data.
And so much could influence the price of flour; just the transportation costs would fluctuate with gas prices and run-to-run variation in transport time. Is trying to map prices exactly to the lowest possible across different regions this essential, or is it bikeshedding? I think the market as it exists does fine even when some flour producers capture a greater profit; if it was unsustainable no-one would be buying their flour. Instead, an individual being unable to buy bread, or enough bread, is a sign of more systemic issues not linked to the capturing of small margins at various points of the supply chain.
I know the bread is hypothetical, but I don't really get your complaint, beyond "it isn't 100% efficient at delivering the lowest possible selling prices". Also, even if bakers see that other bakers are buying flour cheaper, their seller may not be able to match that price anyway. There are also price cuts for preffered customers because they have regular and consistent flour purchases that help the producer avoid shortage or surplus and thus can lower the price to that baker.
For the distribution of goods, you are correct that your version is more efficient. The problem is do you have a better system than the free market at solving this problem? I remain highly skeptical, because this is one of the problems the free market is best at solving; a concerted from-the-top approach to dictating resource allocation has been tried in every socialist country and has never succeeded; policy making has never been able to beat billions of localized microeconomic decisions from free agents trying to optimize their expenses* and run profitable or successful lives.
*Edit: optimizing their expenses to the extent they choose to. If someone doesn't care about the price of toilet paper, they don't have to. Could it be easier for a buyer to know if "the price is right" for that toilet paper? Yes. And we constantly see improvements and more transparency in this arena, which should make you happy.
I'll try to read the rest of your comment, but real quick, you have coupons and sales wrong. Sellers do not want to increase surplus, just like they do not want shortage.
If a product is listed for $5 and has a market of 10 buyers, this includes everyone who would pay more then $5.
But there is an uncaptured market who would pay less than $5, and putting out coupons or sales gives a chance to capture some of those buyers at a reduced margin. This is still attractive because it is better to sell at a reduced margin than not sell. This is also why items in shortage typically don't revieve sales.
So while you could look at it as "we can still sell some of these for $6 as long as we have a sale at $5", this is wrong. You always want your regular price to fit to the largest profit, rather than somewhat higher, because coupons and sales aren't going to be used by every buyer. Of those buyers who would have payed $5 rather than $6, how many will use the sale or coupon? This is why they are mechanism to capture the sub-$5 market instead; whatever you manage to sell is strictly a bonus, especially if the store needs to get product off a shelf.
I don't see how this works because "how hungry are you" is private information. Nobody would want a system to be tracking how much you ate before the current meal.
More generally, I think more supply chain transparency would be improve things (basically, what's getting shipped and what's in warehouses) but more tracking of people's consumption seems bad.
Shared for the basic concept; I’m not sure that historical price charts can be interpreted as easily as she makes it sound.
It might be interesting to compare a carbon tax to the increase in gasoline prices we saw this year. Both of them cause consumers to cut back where they can and improve efficiency. However, the increase in oil prices also encourages oil producers, while a carbon tax won’t do that.
But I find that when I tell people that higher gas prices are actually good, environmentally speaking, they don’t appreciate it. I think this means we probably aren’t going to see significant carbon taxes.
Less a comment on tfa than side note on gasoline:
I realized that if agw is real, we are absolutely toast a few years ago when I went to a Bill Mckibbon lecture. Of maybe 1000 in attendance, less than 10 rode bikes, most drove cars, mostly with them only inside, and a significant percentage were driving less than 2 miles.
I mean, if the people attending a bill McKibbon lecture can’t be arsed to change even their leisure time gas expending habit, what hope is there really?
These days, some of those cars might be electric?
Maybe, for the more affluent. Probably everyone there would prefer electric. But simply trading every ice for electric is insufficient to stop, let alone reverse, agw.
I don’t know, and in a way it doesn’t matter, whether replacing cars with bikes, even for leisure trips, would solve the problem. I doubt it. But i know it would make a dent, and if very few are willing to make substantial individual changes it will be nigh on impossible to make society-level changes. Again, what’s alarming and disappointing is that these were people who proclaim a deep interest and u derstanding of agw. I wouldn’t expect attendees at a Biden rally to be making these kind of changes.
It remains a very disillusioning day.
I certainly hoped you came around on the "if agw is real" bit. It is, undeniably so. I do aggree with your assessment that we're more or less doomed though.
Climate catastrophy denialism has always been that, denialism. The powerful will always demonize ideas that threaten their power, regardless of truthfulness.
I don’t know why i don’t why I included that phrase. I haven’t the slightest doubt and haven’t since like 1990.
I did believe, up to that point, that there was hope. I knew entrenched interests and regular folk would be slow to understand and respond, but my heart sank at this lecture. When even the supposed true believers act without purpose or urgency, what hope is there?
Thanks for clarifying. The fact that doing so was neccessary context just shows how bad the current state of affairs is.
For reference, this is what came up when I searched for "agw" as a refresher: https://www.americanthinker.com/articles/2019/10/the_problem_with_anthropogenic_global_warming.html