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Right. On a market with free pricing "shortages" manifests as raised prices. Which serve as a signal to increase supply, providing a self healing mechanism. Th

Right. On a market with free pricing "shortages" manifests as raised prices. Which serve as a signal to increase supply, providing a self healing mechanism. The type of shortages where buyers have to wait in line, are picked by lottery etc, only appear when prices are fixed.

atq2119 4y ago
Of course, that doesn't mean that price fixing is always a bad idea. We're just so used to not having to deal with genuine shortages that most people don't even consider what can happen when there's a true shortage of essential goods like food.
woodruffw 4y ago
Except for inelastic (including periodic) markets, which are many of our markets. For example, you can't self-heal the supply of fresh peaches if there are no more fresh peaches left in the season.
- samatman 4y ago
  There is an existing market solution to this, which is futures. Unless you sell onions (loooooong story) futures exist to insulate farmers from some of the fluctuation in markets and provide price signals for future planting (which is on the order of years, iirc 10 for a peach tree to become fully productive). It doesn't work perfectly and in fact can't. But it's there and it functions. Edit to add the other half of this: someone looking to buy a peach wants to eat a piece of fresh fruit or make a dessert, a season of high prices might mean they make more apple crumble and less peach cobbler. It's not the end of the world. There were many years when I was in the black cherry buying market for roughly six weeks a year, because I couldn't afford to eat them over four bucks a pound.
  - woodruffw 4y ago
    Right! I didn't mean to imply that there weren't market solutions, only that they have somewhat absurd consequences on their tail ends (pure supply economics creates an "infinite" price for "none" peaches, futures can make markets less stable if you treat them as the speculative instruments that they fundamentally are.) Futures are probably the right choice. But they're fundamentally derivatives that paper over underlying supply and demand; their chief function is to shift who gets to raise prices and when, not to conjure more peaches.
    - samatman 4y ago
      Infinite prices for nonexistent goods aren't a naked singularity, it represents something meaningful. Naive models don't engage with the information aspect of scarcity but the field of economics certainly does. Peaches never hit infinite price, there's too much production, but "I know a guy" certainly becomes part of the market-clearing mechanism, that boils down to reputational capital. Even in normal market conditions there are people making their living on that sort of capital, picture someone who can reliably get sashimi-grade fish at a less insane price.
- mantas 4y ago
  Increase price and demand will drop to match supply.
- chii 4y ago
  next planting season, there'd be more incentive for someone to plant peaches (vs something else that has a lower profit margin).
  - woodruffw 4y ago
    This isn't an a priori property of peach demand -- for all you know, peaches go "out of fashion" next season.
    - chii 4y ago
      in which case, the correct behaviour is to not plant peaches! The higher price of peaches _during_ the time when it was 'hyped' is the economically correct response.
zo1 4y ago
I think a real part of the equation that we're missing is that the "value" that the market can charge for the fruits of labor is going down. Not sure how to verbalize/explain the point better. So the potential that 1 hour worth of labor can be sold for on the aggregate is going down. And in my head it makes sense because automation is making the bulk of our labor redundant, and it's only going to get worse. The market is signaling something deeper that we're yet to uncover because we're looking at second-order signals.
- BurningFrog 4y ago
  If this was true humanity would be getting poorer. In reality we're steadily getting richer each year. We've been automating away work for 250 years, and people have been worrying about how automation will make them poorer for 249 years :)

atq2119 4y ago

Of course, that doesn't mean that price fixing is always a bad idea. We're just so used to not having to deal with genuine shortages that most people don't even consider what can happen when there's a true shortage of essential goods like food.

woodruffw 4y ago

Except for inelastic (including periodic) markets, which are many of our markets. For example, you can't self-heal the supply of fresh peaches if there are no more fresh peaches left in the season.

samatman 4y ago
There is an existing market solution to this, which is futures. Unless you sell onions (loooooong story) futures exist to insulate farmers from some of the fluctuation in markets and provide price signals for future planting (which is on the order of years, iirc 10 for a peach tree to become fully productive). It doesn't work perfectly and in fact can't. But it's there and it functions. Edit to add the other half of this: someone looking to buy a peach wants to eat a piece of fresh fruit or make a dessert, a season of high prices might mean they make more apple crumble and less peach cobbler. It's not the end of the world. There were many years when I was in the black cherry buying market for roughly six weeks a year, because I couldn't afford to eat them over four bucks a pound.
- woodruffw 4y ago
  Right! I didn't mean to imply that there weren't market solutions, only that they have somewhat absurd consequences on their tail ends (pure supply economics creates an "infinite" price for "none" peaches, futures can make markets less stable if you treat them as the speculative instruments that they fundamentally are.) Futures are probably the right choice. But they're fundamentally derivatives that paper over underlying supply and demand; their chief function is to shift who gets to raise prices and when, not to conjure more peaches.
  - samatman 4y ago
    Infinite prices for nonexistent goods aren't a naked singularity, it represents something meaningful. Naive models don't engage with the information aspect of scarcity but the field of economics certainly does. Peaches never hit infinite price, there's too much production, but "I know a guy" certainly becomes part of the market-clearing mechanism, that boils down to reputational capital. Even in normal market conditions there are people making their living on that sort of capital, picture someone who can reliably get sashimi-grade fish at a less insane price.
mantas 4y ago
Increase price and demand will drop to match supply.
chii 4y ago
next planting season, there'd be more incentive for someone to plant peaches (vs something else that has a lower profit margin).
- woodruffw 4y ago
  This isn't an a priori property of peach demand -- for all you know, peaches go "out of fashion" next season.
  - chii 4y ago
    in which case, the correct behaviour is to not plant peaches! The higher price of peaches _during_ the time when it was 'hyped' is the economically correct response.

zo1 4y ago

I think a real part of the equation that we're missing is that the "value" that the market can charge for the fruits of labor is going down. Not sure how to verbalize/explain the point better. So the potential that 1 hour worth of labor can be sold for on the aggregate is going down. And in my head it makes sense because automation is making the bulk of our labor redundant, and it's only going to get worse. The market is signaling something deeper that we're yet to uncover because we're looking at second-order signals.

BurningFrog 4y ago
If this was true humanity would be getting poorer. In reality we're steadily getting richer each year. We've been automating away work for 250 years, and people have been worrying about how automation will make them poorer for 249 years :)