This is a glib answer, Michael. The point is that markets provide one may,
certainly the best first approximation we have for many things (not
electricity, as it happens), of the costs of using resources one way rather
than another. We talk of externalities, but that is only because the market
gives us a reference point. Naturalness is neither here nor there. In my
flat-headed Austrian way, I want to know, I insist that we need to know to
make rational social decisions, what we are giving up by, say, subsidizing
power or producing milk rather than beer, etc. Otherwise we are stumbling in
the dark. And for this we need, for many but not all economic purposes and
sectors, market prices. We needn't always listen to them. But we must know
what they are. In addition, pricing can be a tool to shape certain social
ends, by providing incentives to use, say, electricity rather than gas, if
we know that electricity is more efficient or desirable on other grounds.
--jks
>
>The problem, David, is that no price is "natural."
>
>On Wed, Dec 27, 2000 at 06:31:20PM -0800, David Shemano wrote:
> > -------------------------------------
> >
> > Correct me if I am wrong, but heat was essentially free in the Soviet
>Union.
> > As a result, people cranked their heaters up to 80 degrees plus on a
>regular
> > basis. Can we not agree that was "more artificial" than what exists
> > generally in a market economy, in which the price people pay for heat is
>at
> > least somewhat related to the cost of delivering the heat to the
>consumer?
> >
> > It seems to me there is a qualitative leap between saying that markets
>have
> > externalities that need to be remedied, and saying that the state of
>affairs
> > created by a market should be given no greater weight as an ideal than
>the
> > state of affairs created by choosing prices out of a hat because they
>are
> > both artificial.
> >
> > David Shemano
> >
> >
> >
> >
> >
>
>--
>Michael Perelman
>Economics Department
>California State University
>Chico, CA 95929
>
>Tel. 530-898-5321
>E-Mail [EMAIL PROTECTED]
>
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