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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Murray N. Rothbard on Price - Dictionary of Arguments
Rothbard II 166 Prices/Demand for money/Rothbard: (…) partial ‘real’ factors - such as government expenditures abroad, a sudden scarcity of food, or ‘a sudden diminution of the confidence of foreigners, in consequence of any great national disaster’ - could influence overall prices or the status of the pound in the foreign exchange market. But (…) such influences can only be trivial and temporary. The overriding causes of such price or exchange movements - not just in some remote ‘long run’ but a all times except temporary deviations - are monetary changes in the supply of and demand for money. Changes in ‘real’ factors can only have an important impact on exchange rates and general prices by altering the composition and the height of the demand for money on the market. But since market demands for money are neither homogeneous nor uniform nor do they ever change Rothbard II 167 equiproportionately, real changes will almost always have an impact on the demand for money. Salerno: ... since real disturbances are invariably attended by ‘distribution effects’, i.e. gains and losses of income and wealth by the affected market participants, it is most improbable that initially nonmonetary disturbances would not ultimately entail relative changes in the various national demands for money...[U]nder inconvertible conditions, the relative changes in the demands for the various national currencies, their quantities remaining unchanged, would be reflected in their long-run appreciation or depreciation on the foreign exchange market.(1) >Price theory/Rothbard. 1. Joseph Salerno. 1980. ‘The Doctrinal Antecedents of the Monetary Approach to the Balance of Payments’ (doctoral dissertation, Rutgers University, 1980), pp. 299-300. - - - Rothbard III 105 Price/exchange/Rothbard: One of the most important problems in economic analysis is the question: What principles determine the formation of prices on the free market? What can be said by logical derivation from the fundamental assumption of human action in order to explain the determination of all prices in interpersonal exchanges, past, present, and future? >Exchange/Rothbard, >Terms of Trade/Rothbard, >Markets/Rothbard. Rothbard III 108 In order for an exchange to be made, then, the minimum selling price of the seller must be lower than the maximum buying price of the buyer for that good. (…) the price of the good in isolated exchange will be established somewhere between the maximum buying price and the minimum selling price (…). We cannot say at which point the price will be set. That depends on the data of each particular case, on the specific conditions prevailing. In particular, it will depend upon the bargaining skill (…). Rothbard III 110 Competition: [in this case] the price in the exchange will be high enough to exclude the “less capable” or “less urgent” buyer - the one whose value scale does not permit him to offer as high a price as the other, “more capable,” buyer. (…) the addition of another competing buyer for the product considerably narrows the zone of bargaining in determining the price that will be set. Rothbard III 111 The general rule still holds: The price will be between the maximum buying price of the most capable and that of the next most capable competitor, including the former and excluding the latter.(1) It is also evident that the narrowing of the bargaining zone has taken place in an upward direction, and to the advantage of the seller of the product. >Auctions. Rothbard III 112 Universal competition: (…) in a modern, complex economy based on an intricate network of exchanges [there is a] two-sided competition of buyers and sellers. Rothbard III 114 As the offering price rises, the disproportion between the amount offered for sale and the amount demanded for purchase at the given price diminishes, but as long as the latter is greater than the former, mutual overbidding of buyers will continue to raise the price. The amount offered for sale at each price is called the supply; the amount demanded for purchase at each price is called the demand. Rothbard III 115 As long as the demand exceeds the supply at any price, buyers will continue to overbid and the price will continue to rise. The converse occurs if the price begins near its highest point. Equilibrium price/supply/demand/Rothbard: If the overbidding of buyers will drive the price up whenever the quantity demanded is greater than the quantity supplied, and the underbidding of sellers drives the price down whenever supply is greater than demand, it is evident that the price of the good will find a resting point where the quantity demanded is equal to the quantity supplied (…). Rothbard III 116 Value/exchange/Rothbard: Evidently, the more capable or “more urgent,” buyers (and sellers) - the supramarginal (which includes the marginal) - obtain a psychic surplus in this exchange, for they are better off than they would have been if the price had been higher (or lower). However, since goods can be ranked only on each individual’s value scale, and no measurement of psychic gain can be made either for one individual or between different individuals, little of value can be said about this psychic gain except that it exists. Equilibrium: The specific feature of the “clearing of the market” performed by the equilibrium price is that, at this price alone, all those buyers and sellers who are willing to make exchanges can do so. >Market/Rothbard. Rothbard III 117 Market/Rothbard: It is important to realize that this process of overbidding of buyers and underbidding of sellers always takes place in the market, even if the surface aspects of the specific case make it appear that only the sellers (or buyers) are setting the price. ((s) see above, equilibirum price). Rothbard III 119 Once the market price is established, it is clear that one price must rule over the entire market. Rothbard III 120 Demand/supply: (…) as the price increases, new suppliers with higher minimum selling prices are brought into the market, while demanders with low maximum buying prices will begin to drop out. Equilibrium price: (…) once the zone of intersection of the supply and demand curves has been determined, it is the buyers and sellers at the margin - in the area of the equilibrium point - that determine what the equilibrium price and the quantity exchanged will be. Rothbard III 122 Now we can remove this restriction and complete our analysis of the real world of exchange by permitting suppliers and demanders to exchange any number of [goods] that they may desire.(…) the removal of our implicit restriction makes no substantial change in the analysis. Rothbard III 229 Price/Rothbard: it is obvious that man, in his capacity as a buyer of consumers’ goods with money, will seek to buy each particular good at the lowest money price possible. For a man who owns money and seeks to buy consumers’ goods, it is clear that the lower the money prices of the goods he seeks to buy, the greater is his psychic income; for the more goods he can buy, the more uses he can make with the same amount of his money. The buyer will therefore seek the lowest money prices for the goods he buys. Thus, ceteris paribus, the psychic income of man as a seller for money is maximized by selling the good at the highest money price obtainable; the psychic income of man as a buyer with money is maximized by buying the good for the lowest money price obtainable. >Cash balance, >Value, >Market, >Exchange/Rothbard, >Allocation/Rothbard, >Income/Rothbard, >Indirect exchange. Rothbard III 234 Indirect exchange: (…) with money being used for all exchanges, money prices serve as a common denominator of all exchange ratios. Rothbard III 235 Instead of a myriad of isolated markets for each good and every other good, each good exchanges for money, and the exchange ratios between every good and every other good can easily be estimated by observing their money prices. Barter: Here it must be emphasized that these exchange ratios are only hypothetical, and can be computed at all only because of the exchanges against money. It is only through the use of money that we can hypothetically estimate these “barter ratios,” and it is only by intermediate exchanges against money that one good can finally be exchanged for the other at the hypothetical ratio. >Demand/Rothbard, >Supply/Rothbard. Rothbard III 341 Price/production costs/Rothbard: (…) once the product has been made, "cost" has no influence on the price of the product. Past costs, being ephemeral, are irrelevant to present determination of prices. The agitation that often takes place over sales "below cost" is now placed in its proper perspective. It is obvious that, in the relevant sense of "cost," no such sales can take Place. The sale of an already produced good is likely to be costless, and if it is not, and price is below its costs, then the seller will hold on to the good rather than make the sale. That costs do have an influence in production is not denied by anyone. However, the influence is not directly on the price, but on the amount that will be produced or, more specifically, on the degree to which factors will be used. >Factors of production/Rothbard. Rothbard III 464 Marginal utility/price/Rothbard: The marginal utility of a unit of a good is determined by a man’s diminishing marginal utility schedule evaluating a certain supply or stock of that good. Similarly, the market’s establishment of the price of a consumers’ good is determined by the aggregate consumer demand schedules—diminishing—and their intersection with the given supply or stock of a good. >Factor market/Rothbard, >Marginal product/Rothbard. Rothbard III 774 Price/Time preference/demand for money/interest//Rothbard: Time Preference and the Individual's money stock: (…) an individual's money stock Iowers the effective time-preference rate along the time-preference schedule, and conversely a decrease raises the time-preference rate (see above). Demand for money/cash balance/interest: Why does this not apply here? Simply because we were dealing with each individual's money stock and assuming that the "real" exchange-value of each unit of money remained the same. Money units: In this case time-preference schedule relates to "real" monetary units, not simply to money itself. If the social stock of money changes or if the demand for money changes, the objective exchange-value of a monetary unit (the PPM; purchasing power of monetary unit) will change also. If the PPM falls, then more money in the hands of an individual may not necessarily Iower the time-preference rate on his schedule, for the more money may only just compensate him for the fall in the PPM, and his "real money stock" may therefore be the same as before. >Cash balance/Rothbard. This again demonstrates that the money relation (money supply and demand for money) is neutral to time preference and the pure rate of interest. Prices: An increased demand for money, then, tends to Iower prices all around without changing time preference or the pure rate of interest. Rothbard III 816 Price/goods/money/Rothbard: The price of goods-in-general will now be determined by the monetary demand for all goods (factor of increase) and the stock of all goods (factor of decrease). Demand: Now, when all goods are considered, the exchange demand for goods equals the stock of money minus the reservation demand for money. (In contrast to any specific good, there is no need to subtract people's expenditures on other goods.) The total demand for goods, then, equals the stock of money minus the reservation demand for money, plus the reservation demand for all goods. Goods: The ultimate determinants of the price of all goods are: the stock of money and the reservation demand for goods (factors of increase), and the stock of all goods and the reservation demand for money (factors of decrease). Purchasing power: Now let us consider the obverse Side: the PPM (purchasing power oft he monetary unit). The PPM (…) is determined by the demand for money (factor of increase) and the stock of money (factor of decrease). The exchange demand for money equals the stock of all goods minus the reservation demand for all goods. Therefore, the ultimate determinants of the PPM are: the stock of all goods and the reservation demand for money (factors of increase), and the stock of money and the reservation demand for goods (factors of decrease). Symmetry: We see that this is the exact obverse of the determinants of the price of all goods, which, in turn, is the reciprocal of the PPM. Barter/exchange: Thus, the analysis of the money side and the goods side of prices is completely harmonious. No longer is there need for an arbitrary division between a barter-type analysis of relative goods-prices and a holistic analysis of the PPM. >Economy/Rothbard. 1. Auction sales are examples of markets for one unit of a good with one seller and many buyers. Cf. Boulding, Economic Analysis, pp. 41-43._____________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. |
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 |
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