Over on Environmental Economics, I took an opposing position to the author, who was asking for a reason for underwriting milk prices.

Tim,

I am not sure how I feel about this. There are plenty of circumstances where prices alone are insufficient to establish the quality that people want from the goods that they buy. Treating prices as an absolute tool, a solitary tool of cooperation, is simply failing to understand their purpose as a tool and, instead, making a tool into a purpose.

When presented with the OPTION of choosing between various prices, people will choose the lower price, but there are psychological as well as material differences involved in that decision. Most goods are NOT bought on the basis of price. In fact, most goods in the developed world are bought on the basis of aesthetic preference, rather than price.

Many of the things we buy are not simply price-based decisions. They are more complex weighings of multiple properties, including those properties that are external to the product itself. Prices absolve us from making those complex decisions. That’s important, because when two things are priced equally, we will often choose the thing that has additional properties.

I don’t like regulating prices, but if we’re going to support an abstract good like “government,” which looks like it’s actually harmful in the long run, why can’t we support an emotional good (agrarian ideals) by a tax as well?

That’s the issue.

The question is whether prices alone are sufficient to create an aesthetic world, or are merely sufficient to create a material world. In other words, are they sufficient to create a San Francisco and New York, or sufficient only to create Los Angeles and Cleveland?

Commodities, in particular, are immaterial in difference. Prices alone do not determine the value of milk. We may in fact want an insurance policy. By mandating complete freedom of prices we must use government to redistribute funds to our preferences, rather than private transactions to redistribute funds to our preferences. It is not unclear that while people will buy cheaper goods because of the competition between themselves (Home Depot and Walmart) they may prefer to keep a downtown of small shops. Much of the world makes this determination simply by preventing capital wars by regulating who can enter a local economy (zoning). Part of excess liquidity is making it possible for capital wars to borrow external monies which are then used against an aesthetic value set in a community. This essentially borrows against a future, to produce goods now against the interests of accumulating capital locally and building a nicer aesthetic environment.

For example, why not regulate the use of post-war panel products and increase minimum land use? This would increase the cost of home and building development in that only bricks and wood could be used. Over time, this restriction capitalizes value in the community, creating an asset that could not be created by other means.

Prices alone are insufficient to create these kinds of assets. They are sufficient only to produce “Clevelands.”

It looks like the worlds we like to live in are the aesthetic ones. It looks like the decisions we like to make are easier made with prices.

It looks like failing to recognize this may in fact be simply a different form of privatizing wins (choices) and socializing losses (a less aesthetic environment) or, cast in a worse light, undermining aesthetic choices and even possibly undermining the social order (mythos, traditions) by privatizing wins through prices.

Prices allow us to allocate resources and make decisions that we could not by other means.

They are intended for inconceivable things.

Aesthetics are not inconceivable. They are both conceivable and realizable, and they have asset value.

This justifies things for aesthetic reasons. We justify things for moral reasons. We justify things for class-warfare reasons. We justify things for many reasons.

As far as I can tell, the only justification that does not amount to privatizing wins and socializing losses, but the opposite, is justifying aesthetic ambitions. Like monuments, they capitalize the future.

This may be the only real social good that small communities can capitalize on, in the same way as we regulate by contract that you can’t park your car in a driveway, build a shed, or hang clothes outside in a housing development. There is an increase in cost for the aesthetic. People pay for it.

If you don’t like that the milk in your town is priced higher, or if you don’t like the regulations requiring more expensive houses, then move somewhere else. It’s that simple.

If you’re talking about class war that’s one thing, and it’s political. If you are  talking about keeping local dairy farms in business, it’s no different from supporting a levy for parks. There just isn’t any difference, except that I can choose not to buy milk, while I can’t choose not to pay a levy.

So I am afraid that I disagree with you. For aesthetic reasons. :)

(Continuing, in a separate comment:)

People make localized judgements to affect prices in order to support agendas all the time. The issue is only whether it is a class warfare (political_ agenda, an economic agenda (to siphon), or an aesthetic agenda (capitalizing local asset values for future returns).

I don’t compliment France very often but they do protect their farms and farmland. Farmers don’t get rich in the process, but they preserve their ability to produce quality products that can compete with foreign products on something other than price. This is NOT a bad decision for the country on many levels.

Mandatory markups on milk, for example, make sense to me. It puts money directly in the farmer’s hands without passing it first through government hands, then discounting it, then corrupting it. In fact, this is far superior to taxation in many ways. As long as the people choose it (which is to say that they choose to pay the levy on the product), I don’t really see the problem with it.

That is, unless you want to profit from someone else’s aesthetic payments and live in the community while taking advantage of lower prices, in which case you’re stealing from your neighbors.

There is a difference between a local contract (a town or village contract between existing residents) and a town that foricibly redistributes money to immigrants or other jurisdictions. This is just theft for the purpose of empowering government.

But if local people want to say that milk in this town is more expensive, and the reason is that we want to subsidize farmers, then it is simply a less-expensive means of preserving farms than taxes, redistribution, or other forms of regulation. It’s just cheaper.

Let me add something here that was introduced in Federalist Papers 10:

A government MUST OF NECESSITY execute oppression on one group or another once the economic interests of one part of the population are different from the other part of the population.

This warning was not heeded and we had the Civil War.

When a society is uniformally composed of farmers, and its government regulates the trading of farm goods, that government can be very large. The relative disparity of income in such a population is very small.

In an advanced society, however, with large numbers of people operating within a vast division of labor, government has an epistemic and procedural problem in that it should actually be very localized, and localities should cater, not to a diverse mix of people (which simply empowers the government and leads people to regulatory slavery), but to a set of people with limited interests. In our governments, the general trend has been to represent classes of people: Houses, Lords, Senators, and the like. However, our economies are very complex and composed of people with divergent interests, so what must of necessity happen is that we regulate everyone to the point of  mutual unhappiness. We diminish society and exclude excellence.

One of the excellences we exclude is the aesthetic world. We exclude the possibility of making the world beautiful, contributing to the local society, and capitalizing the land or architecture itself for future generations, if not simply for our own later enjoyment in our own lives.

Our enamored relationship with prices alone confuses their function, which is simply to inform us as to the relative scarcity or plenty of goods and services so that we may alter our behavior. Government should not interfere in those prices (especially in debt) for fear of misinforming us as to what we should or should not do.

But this is not a moral question or an absolute question. We can do whatever we want as long as we understand the consequences, and as long as government is not putting itself in power by regulating conflicts it creates in order to justify its existence. (For instance, importing people into a community for a supposedly common – i.e. Christian – good instead of regulating the local economy for the betterment of the people who already live there.)

An economist who thinks prices are anything more than a system for informing us of the plenty and scarcity of goods, and who believes that prices are sacrosanct for some reason, especially that lowest prices are a value to a people, simply does not understand the limited properties of prices.

I suspect that most people do not understand the limited categorically descriptive power of numbers, because these are very complex sets of ideas.

But most of us can understand that forcing all milk in an area to be sold at x cents above y cost, or some other such scheme, so that farmers can have well-painted, well-maintained farms simply is a choice. It’s not even a moral one. It’s a simple one.

By contrast, religiously worshiping prices makes a dump out of places like Los Angeles and much of the Rust Belt.

This is why kings are better governors: they see the future value of their assets. And politicians, like corporations run by the quarter, think, because they must, in too short a term to build a beautiful world.

 

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