Price

From P2P Foundation
Jump to: navigation, search

Definition

Dmytri Kleiner:

"Price is political. Who pays what to whome and for what is fundamental to political economy. When talking about stocks of goods, understanding price is fairly simple. Supply and demand. The price falls until the stock clears. However thinking in terms of political economy requires thinking about flows. Stock are an output, and to have a continuous stock of any product the price must be sufficient to provide for all inputs, otherwise the stock can not be replenished. Thus the price of anything is at minimum the total cost of the Factors of production required to make it. The cost of Land is called Rent. The cost of Labour is called Wages. The cost of Capital is called Interest. Just like the names of the Factors, these terms are often misunderstood because their meaning is quite different from common usage. Rent is not the monthly fee you pay for an apartment. Interest is not the percentage you pay on your creditcard balance. Wages is not the amount of the cheque your employer sends you. All these tings are prices and all prices are composed of Rent, Interest, and wages. The economic meanings are different than the common meanings. Rent is the portion of the final price of the product required to acquire access to enough Land to reproduce it. Wages is the portion required for the Labour. Interest for the Capital. Who sets and collects the factor prices is not a function of any natural economic laws, but rather are a matter of politics, shaped by power and struggle." (http://kleiner.posterous.com/the-bluffers-guide-to-economics-price)


Discussion

Simon Gramstrup:

"We cant have efficiency in a price/market system. It really is just a mathematical ideal.

This ideal is partly based on the idea that we are rational beings that can calculate every combination and arrive at the best price, and that we behave nicely. However, this is not the case. There are structural flaws, and behavioral flaws in a price/market system.

One problem is the fact that in a marked/price system the financial sector is a necessity. It is used to supposedly move money around to where it matters the most, but at the moment, 70-80% (estimated) of our workforce is occupied with moving, distributing or protecting these money. As a necessity, this whole construct is to be considered simply as an administrative overhead ontop of any marked/price system. Unavoidable, that's not efficient.

Another huge problem is artificial scarcity. There's no mechanism in a marked/price system to cross the barrier into abundance. When a product can be produced in huge numbers, or the marked is saturated, then money disappears and is funneled into other ventures. The result is what we see today, where people are starving although we in purely technical terms could provide for everyone. In this light, we need to examine how organisms behave in an environment of scarcity, and that is the 'get it, or die' behavior we see in nature. A human in an environment of abundance behave in a totally different manner.

What we learn from behavioral economists/scientist is that when we include humans in the equations - things go wrong. One problem is that we tend to protect 'our' valuables and thereby distorts free markets with artificial barriers (cartels, laws etc) to protect our valuables, so there will never be an ideal market value. The concept and ideal of a 'free marked' only exist on paper.

Every single bad thing that we, or our companies does in a marked, everything you mention, is a direct result of the mechanisms of the marked/price system. Dissing nature, fraud, manipulation of wants, cheating etc. It can't be helped.

Lastly (in this post) there's the problem of inequality. Inequality is a natural and certain result of the forces of markets. Whenever the difference gets to big, unrest happens, 'they' adjust the system, and then it comes back. These cycles have been ongoing for the last few thousands of years, and will never go away.

"But, shouldn't these new institutions have to compete with one another? what else keeps them lean?"

It's true that we need institutions to 'die off'. That's imho one of the few things that markets got right. If we look at the open source scene, we see similar die-offs, without any problems. The method is called 'Stigmergy' and it works the same way - stale or 'lousy' projects die-off naturally.

Bottom line is that we should be extremely cautious of using price/markets as our general operating system, and the idea of competition is imho highly overrated." 9[1])

User Owned theory critique

Within User Owned theory, Price is the amount a consumer pays when buying a product.

Price = Profit + Cost

Profit is the non-negative difference between that price and the production Costs that the owners of Physical Sources have already paid.

Notice Wages are a Cost, so perpetually keeping Price Above Cost is not required except in systems such as Capitalism where it is used as a measurement of success.

More information