Absence of Pandemonium Proves Decentralized Prices Work

decentralized pricesThe commies and socialists would love to have us believe that it would be a far better use of resources to institute price controls on goods set by a central authoritarian government. If that’s the case, why does history reveal that communist countries have long found it difficult to meet even the very basic needs of the citizenry and why, pray tell, do those same regimes (China, Iran, Cuba) devote an inordinate amount of time and energy trying to keep the forces of decentralized prices out?

What free markets have proved over the years is that decentralization works and is the best way for the market to find the most beneficial use of resources and distribute them over broadest area possible, where they can do the most good.

Consider that there are way more ways to screw up the system of resource allotment than there are to allocate effectively. Let’s consider two random resources: Jimmy Buffett and medical equipment. Would it be a good use of of these resources to ask Mr. Buffett to perform brain surgery with the medical equipment? Probably not, unless Mr. Margaritaville has talents we’re unaware of. So how do we decide what is the best way to employ these resources? Well, the free market and decentralized prices have decided that it’s best to give Jimmy Buffett a guitar and a microphone and find a surgeon for the medical equipment.

Decentralized prices fall outside the realm of random chance or central planning. Each holder of a resource takes it upon himself to put that particular resource to the best possible use that benefits him. Take a farmer with crops to sell. He’ll either consume what he’s grown or use his brain to obtain the best price from the party that values it the most. The farmer’s process of vetting offers and deciding what is an acceptable price is replicated millions of times all over the world at any given moment. Think a central planner or coin flip could do better? Not only no but hell no!

Market price is the most objective way to process information about a resource and arrive at a price suitable to both buyer and seller. Remember the farmer with his crop? If the day comes that it is not profitable to work the land, then he finds an alternate use, such as selling to a real estate developer or turning it into a self storage facility.

In a free market, the options truly are endless yet never random.

The American Monetary Association Team

American Monetary Association

Flickr / Sam Howzit

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