Saturday, December 29, 2012

Miles Kimball — Steven Pinker on How the Free Market Makes Us Uneasy

As far as I can see, this takes Market Pricing out of the realm of human nature, and there seem to be no naturally developing thoughts or emotions tailored to it.
Confessions of a Supply-Side Liberal
Steven Pinker on How the Free Market Makes Us Uneasy
Miles Kimball | Professor of Economics and Survey Research at the University of Michigan

People inherently know that there is a difference between price and value, although most economists presume that they are the same. Price discovery in markets is based on the assumption that price is identical with value. 

If that were true, Consumer Reports would not exist, for example. Markets are not equipped to discover actual value, only perceived value, and as all successful sellers realize, perception can be manipulated. In fact, that is what the field of advertising & marketing is essentially about — cognitive bias.

1 comment:

Unknown said...

"Price discovery in markets is based on the assumption that price is identical with value."

This is false. Price discovery in markets is based on the assumption that there are desirable prices of goods.

There is no necessary assumption of price and value equality in markets and price discovery. Markets allow you to think what you want. If you think there is a difference between value and price, then you can use your resources and exploit the difference. If you don't think there is any difference, then you can use your same resources differently.

Consumer reports exists IN THE MARKET because THE MARKET does not assume equality between price and value!

How can you claim that consumer reports exists in the market to deal with the lack of equality between price and value, and at the same time claim that price discovery in markets assumes equality? You're not making any sense.

The market is not some deux ex machina mechanism that prices everything for us, without us doing any pricing. The market process is the very process we use to price things!