Wednesday, December 21, 2005

Fair Prices

Inspired by a post over at Cafe Hayek

"fair prices and fair profits" can be objectively determined? How? Consensus of subjective opinions?

Any artificial construct introduces subjective definitions of "fair" price levels. Fair in and of itself is a subjective modifier.

Prices are derived from individuals acting in their own self interest. They decide what is subjectively fair to accept. Any outside entity determining "fair" is merely imposing a subjective value judgment, whether it be a single dictator or an aggregation of many it is a subjective judgment call.

The ultimate consensus of subjective judgment calls is the unfettered market, where each individual is allowed to make their own judgment on fairness in price accepted.

Any time the government "dips into profits" it is an ill effect on the person earning those profits, but denied the use of said profits. You may want to argue there is some general welfare gain between confiscated profits and re-distributed wealth, but you are making a grave error.

Utility is subjective and ordinal not cardinal. You can say this util I lost is less than that last util I enjoyed. You can say the util the recipient of my $ is more than the previous util they enjoyed. But you cannot subtract my lost util from their gained util and say that it is a greater amount of util enjoyed than the status quo would have been.

You may be able to quantify that I lost x $'s worth of util's and that this group gained x $'s of utils, but you cannot say my lost utils are of =, < or > value.

You may ask if the amount utils forgone with the payment of taxes is balanced with the utils enjoyed by the amount of government service I receive. (no, but my alternative, my utility of avoiding taxes is less than the benefit of paying taxes plus receiving government services and not being jailed for tax evasion.) In democracy I vote to bring government benefits closer to tax payment dis-utility, modified by what I think the social contract ought to be. Too bad too many voters don't seem to agree with me on what the social contract ought to be, if they did social security and Medicare would be welfare for the poor elderly rather than all the elderly - the wealthiest age group in the nation.

6 Comments:

Anonymous John P. said...

Justin, I just want to make clear that the statements you're (rightly) objecting to were posted at Cafe Hayek as examples of myths that Americans commonly have about economics.

6:22 AM  
Anonymous MIB said...

Hi, J. How's the move going?

OK... so 'fair' is subjective. So is 'utility', regardless of who's doing the measurement. But a consensus judgement on what's fair can qualify as 'objective', technically speaking. Objectivity suggests the impersonal; group or collective decisions by definition represent an ethos or cultural standard expected for individual participation. Certainly, tax rates -- a mechanism for capitalizing public resources -- and their relative fairness would count as objective by the same reasoning.

9:35 AM  
Blogger Justin said...

The movers will be here tomorrow. I start driving saturday. Close on ahouse next thursday. It is going well, a bit hurried, but well.

A consensus judgment, with the most participants is arrived how? Seems the unfetterered market is the best way to get the most inclusive judgement of fairness, which means no board determinining "fair" price levels. Fair prices are derived from market interactions. Less fair rely upon some entity to dictate prices. The smaller the entity, the less tolerant of individual tastes and preferences, the determinants of an individuals "fair price."

10:00 AM  
Blogger doinkicarus said...

MIB said: "But a consensus judgement on what's fair can qualify as 'objective'... Objectivity suggests the impersonal; group or collective decisions by definition represent an ethos or cultural standard expected for individual participation."

There is no such thing as a group decision, or a collective decision -- it is simply a number of agreeing individual decisions. Accordingly, any consensus judgement is all too often reduced to an appeal to popularity, or the lowest common denominator.

6:35 AM  
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6:37 PM  

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