31.8.17

THE INFORMATION CONTENT OF PRICES.

With the new academic year upon us, how stands the college bubble?  Tuition spikes send higher education enrollment tumbling.  The article interviews Richard Vedder. “There’s an increasing skepticism on the part of the public that college produces the bang for the buck that it claims to.”  Put simply, where the risk is greater and the expected return is lower, you'll see fewer investors.

And the recent flooding in Houston has led to a re-litigation of price gouging.  Don "Cafe Hayek" Boudreaux urges people critical of the behavior of store-keepers in the afflicted area to consider the consequences of wishful thinking.
Allowing people in search of items to buy to spend money as they individually see fit in that search, rather than diverting their expenditures into non-monetary forms – such as waiting in queues or calling in political or personal favors – creates far more accurate and nuanced information about which particular needs are currently greatest.

Pointing out the many ways in which the price system isn’t perfect is child’s play (and often indeed is childish).  Explaining how that which emerges in the price-system’s place when it is suppressed is quite another matter.  Imagining an allocation of resources superior to that which the price system gives rise is also child’s play (and nearly always childish).  Devising a method that will work in reality to achieve this superior allocation of resources has yet to be done.
That noted, most of the welfare properties of price systems are propositions based on equilibrium conditions.  There remain as opportunities for future research the welfare properties of price systems out of equilibrium.

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