Jadyn Hanson
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Price is a large determinant in today's society. It is a large determinant on how people spend their money, and determine worth. Through the increase in demand and increase in needed supply, one can see the relations to price. Price ultimately stands as an indication of scarcity. Scarcity is how scarce or rare a product or material is. In a typical scenario, the higher the price, the higher the scarcity. Production is largely affected by the scarcity of products. This escalates to affect the whole supply and demand chain. How much something costs depends more on the consumer's preference, and their regards to the price. Understanding how prices are set and their relations to scarcity are important for fully understanding the economy in which we live in. Many people complain about price gouging and unfair pricing. If one fully understands price pertains to the economy, every price is explained. Bylund explains the origins of price in his book “The Seen, the Unseen, and the Unrealized” stating:
“Indeed, the only reason a consumer want is satisfied through market production is because the final good can be sold (that is, entrepreneurs anticipate it to be salable) at a certain price--or at least within an estimated price range--and that entrepreneurs are able to choose a process for producing this value that incurs lower cost per item than the final price” (Bylund, P.L. 2016, p.39).
Through this example, Bylund walks us through a story where a lady grows apples. (Bylund, 2016). The goal of this was to help explain how prices come to be what they are. She is not going to make money because of the apples themselves, but rather because people want apples. Additionally the orchid does not contribute to the price, it only allows the product to be sold. The orchid is justified through the labor, which then contributed to the price. Because consumers are always wanting something, there will always be needs. From my understanding of what he writes, everyone has the opportunity to make money, because everyone wants something. Even though the opportunity for money may be given, not everyone is an entrepreneur.When a seller sets a cost, ultimately the price will reflect if it is accurately set. Consumers' purchasing habits can reflect easily whether a product is set at the right price. Even at extremely high costs, if only a few consumers find a product to be fairly priced, the seller has done its justice.
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In “The use of Knowledge in Society” Heyek discusses economic order. Through his writing he seeks to understand rational economic order. I believe his main argument though this writing is that those who are more knowledgeable, have the ability to make more money and better understand our society (Hayek, 1945). To this statement I completely agree. I believe that in today's society it is very possible for people to make money, without fully understanding money in our society. The more knowledge one has on the markets and agendas of politicians too, the more they can predict money inflow and outflow. Hayek states:
“It is, perhaps, worth stressing that economic problems arise always and only as a consequence of change. So as long as things continue as before, or at least as they were expected to, three arise no new problems.”(Hayek, 1945, p. 523)
Today, people have a larger access to knowledge than ever before, they can predict prices much better and understand costs. Bylund and Hayek give great examples of how prices are affected by consumers' choices in society every day. The issues with money and economic freedom always seem to arrive when change happens in the environment. Having a knowledge of how cost and price are affected is an advantage that many use to make money. In today's society, change is happening at a much more rapid pace. As Heyek warns, this sometimes causes people to take matters as a less significant event. I believe we are seeing this current day, the alarming amount of large news segments each week is hard to comprehend. The economic problems are no less important, however, they are more overlooked. The constant and forgoing changes that our country has seen in the past ten years is complex. I believe society has become much too adaptant to some of the changes that have been made by politicians. Many are unaware of the large changes currently taking place around the United States within our Government and in our Law. Decentralization is a complex idea that can only solve some of the issues arising. Knowledge in time similar to this needs to be used correctly.
Because all have a different mind and different ideas, one can not fully know how to best run the economy. The allocation of ideas and collection of knowledge is important for those making economic decisions. In order for people to fully understand the economy, they must understand how price is set. Knowledge must be distributed when necessary, but also withheld when needed. One way to look at price is as a reflection of scarcity of the product. By fully understanding the production that it took to produce an item, one can understand price in society. It is important that people in the United States have knowledge of our economic system and how it works. Knowledge of price and cost setting can have a large effect on votes and pushes to change laws.
Sources
Bylund, P. L. (2016). Chapter 3: What Prices Communicate. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (pp. 27–45). essay, Lexington Books.
Hayek, F. A. (1945). The Use of Knowledge in Society. American Economic Review, 35(4), 519-30.
