Monetary prices set on markets are not arbitrary. These prices are set neither by sellers nor by buyers; these prices are set by the exchange process and reflect underlying economic realities that are not changed if the state prohibits prices from moving to market-clearing levels. Prices also – but only when they reflect reality rather than the superstitions, fears, or arrogance of government officials – prompt suppliers and buyers to act in ways that improve underlying economic realties.
This short video by Johan Norberg is a must-see. (I’m delighted that, in it, Johan promotes this superb paper by the great Dwight Lee.)
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