Economics Dictionary of ArgumentsHome
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| Price: In economics, price refers to the monetary value assigned to goods, services, or assets in a market exchange. It represents the equilibrium point where supply and demand intersect, determining the quantity of a product traded. Prices convey information about scarcity, preferences, production costs, and market dynamics, influencing consumer behavior and resource allocation. See also Demand, Supply, Markets, Value theories._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Friedrich A. von Hayek on Price - Dictionary of Arguments
Rothbard III 516 Production/price/Hayek/Rothbard: Whether the structure of production remains the same depends entirely upon whether entrepreneurs find it profitable to reinvest the usual proportion of the return from the sale of the product in turning out intermediate goods of the same sort. Whether this is profitable, again, depends upon the prices obtained for the product of this particular stage of production on the one hand and on the prices paid for the original means of production and for the intermediate products taken from the preceding stage of production on the other. The continuance of the existing degree of capitalistic organization depends, accordingly, on the prices paid and obtained for the product of each stage of production, and these prices are, therefore, a very real and important factor in determining the direction of production.(1) Rothbard: (…) how can a reduced consumption profitably support an increased volume of expenditures on producers’ goods? The latter has aptly been termed by Hayek the “paradox of saving,” i.e., that saving is the necessary and sufficient condition for increased production, and yet that such investment seems to contain within itself the seeds of financial disaster for the investors.(2) Rothbard III 512 Prices/production/Hayek/Rothbard: The increased investment expenditure in the higher levels raises the prices of the factors in these stages. >Production structure/Rothbard. It is as if the impact of lower consumer demand tends to die out in the higher stages and is more and more counteracted by the increase and shift in investment funds. The process of readjustment to lower price spreads caused by increased gross saving has been lucidly described by Hayek. As he states: „The final effect will be that, through the fall of prices in the later stages of production and the rise of prices in the earlier stages of production, price margins between the different stages of production will have decreased all round.“(3) 1. F. A. Hayek, Prices and Production. 2nd ed. London: Routledge and Kegan Paul, 1935. Reprinted by Augustus M. Kelley, 1967. pp. 48-49 2. See Hayek, “The ‘Paradox’ of Saving” in Profits, Interest, and Investment, pp. 199–263. 3 F. A. Hayek, Prices and Production pp. 75-76. - - - Boudreaux II 26 Price/information/Hayek/Boudreaux:“ We must look at the price system as such a mechanism for communicating information if we want to understand its real function … The most significant fact about this system is the economy with which it operates, or how little the individual participants need to know in order to be able to take the right action.“(1) >Information, >Knowledge/Hayek. Boudreaux II 32 Individual action/Hayek/Boudreaux: Each owner of private property has incentives to use his or her property in ways that produce the greatest return (…). Spontaneous order/Hayek: Likewise for the individual worker who owns only his own labour services. He will combine his labour with the labour and assets ofthose other private-property owners who promise him the largest return on his work effort - that is, who promise him the highest pay. With each private-property owner seeking only the highest returns on the use of his or her property, an overall economic order is brought about as each owner directs his property toward those uses that pay the highest prices. Similarly, consumers seeking only to get as much satisfaction as they can from spending their income avoid ineffcient suppliers (whose prices are relatively high) and patronize effcient suppliers (whose prices are relatively Iow). Efficiency: Ineffcient suppliers either increase their effciency or switch to other lines of production. Effciency is improved and a complex pattern of productive uses of resources emerges (as Hayek said) spontaneously. This order - this overall outcome - is intended by no one. It is spontaneous. Boudreaux II 32 Prices/Hayek/Boudreaux: One of Hayek's deepest insights is that the signals received by private-property owners on how best to use their property come chiefly in the form of prices - the prices of some options relative to the prices of others. Wages/market: A worker offered $ 30 per hour for his labour time by factory X and $ 25 per hour by factory Y will likely choose to work for factory X because factory X pays relatively more than does factory Y. >Spontaneous order/Hayek, >Knowledge/Hayek. Consumption: Similarly, customers who offer to pay $ 50 per unit for the output of the factory are more likely to acquire that output than are customers who offer only $45. Responding to prices (…) does encourage millions of people to interact peacefully with each other in ways that are mutually beneficial. Planning/free market: No person, no council, no committee, no congress, no parliament plans this successful overall economic outcome. And that's a beautiful picture, one that shows that we can have economic prosperity without giving enormous power to government offcials - offcials who, being human, will always be tempted to abuse such power. >Individualism/Hayek, >Planning, >Spontaneous order. 1. Friedrich Hayek (1945). The Use of Knowledge in Society. In Bruce Caldwell (ed.), The Market and Other Orders, XV (Liberty Fund Library, 2014): 100._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Hayek I Friedrich A. Hayek The Road to Serfdom: Text and Documents--The Definitive Edition (The Collected Works of F. A. Hayek, Volume 2) Chicago 2007 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 Boudreaux I Donald J. Boudreaux Randall G. Holcombe The Essential James Buchanan Vancouver: The Fraser Institute 2021 Boudreaux II Donald J. Boudreaux The Essential Hayek Vancouver: Fraser Institute 2014 |
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