Question: Who Sets the Prices?
Answer: Given that prices are constant with the non-POM money, that is a natural
question. We are used to each owner deciding whether to accept or reject a
price offered by a potential buyer for some item of his property. It is the
price that determines whether the owner will receive any profit from the sale
or not assuming that the other costs of providing this product are already
known. Being able to decide about the prices one will accept as a seller is
extremely important to property owners.
So my first answer will be
unsatisfactory to most but
please keep reading past that.
My first answer is that you
don't care who sets the prices.
The price of a luxury item
(and money can buy only luxury
items, not goods or services
designated "necessities" nor
capital goods or services)
is irrelevant to one's reward
for selling it. That is, one
is not paid for producing a
luxury nor capital nor necessities.
One is paid for the net benefit
that results from one's actions.
We are not used to thinking
that way. We are used to thinking
of pay as being an exchange
of service or property for
money. But the new money doesn't
work that way at all. With
the non-POM the only thing
one ever gets paid for is net
benefit. It isn't the product
nor the service that earns
money, it is the benefit
produced less the harm done. So what
difference does the price of
a luxury item make to the producer?
None at all.
See, I told you that the first
answer would be unsatisfying.
:-)
Let's probe a little deeper.
What person or group sets the
prices? Well, it could be any
person or group. But I think
the most likely group would
be the Payers. They have access
to all the relevant information
and they have a vested interest
in having the price generate
the most benefit for the consuming
public. After all, if the public
isn't happy then the Payers
can't be happy either. Also,
the Payers have access to any
and all information that might
be relevant. Finally, the Payers
are unbiased since they can
have neither money nor luxuries.
Next, let's see what the basis
should be for the price. The
Payers want to maximize the
rewards provided by money since
those rewards are the source
of the Payers' power and importance.
This gives the Payers an incentive
to make the prices as low as
possible so that a given amount
of money will buy as many luxuries
as possible. On the other hand,
the lower the price, the less
money the Payers will have
available to credit the accounts
of producers. It turns out
that the optimum price from
the Payers' point of view is
the cost of production. That
is, the relative value of the
materials and labor (skills
and scarcity) required for
the production of the item
or service determines the price.
Let's say a luxury item costs
$10 in resources to produce
and the Payers set the price
of the item at $50. The luxuries
and the money supply are still
in balance. But, this will
decrease the consumption of
this item in comparison with
other luxury items. Therefore,
producers in the society will
get less pleasure from $10
of resources than they might
otherwise. But if the Payers
go to the other extreme and
price the item at only $2 then
there will be no net benefit
from producing the item to
pay its producers.
From the point of view of
the producer, this is a good
price since if it were higher
then there would be fewer buyers.
If the price were lower the
producer would be paid less
per unit. For the producer,
the maximum pay comes when
the price matches the costs
of production.
From the point of view of
the consumer, the higher price
means that he cannot buy as
many. The lower price means
that the supply of the item
will be reduced. Therefore
the optimum price for the consumer
is also the cost of production.
What about when the cost of
production changes? Does that
change the price? No it doesn't.
If the cost of resources increases
then the producers are generating
less net benefit and should
produce less so their pay for
that production goes down.
That gets the message directly
to the people who need to receive
it, the producers. If the producers
find some way to reduce the
cost of production then they
are the one's who deserve rewards.
But all this is really not
the most important aspect of
prices because it refers only
to the prices for luxury goods
and services. We have not concerned
ourselves with the free market
aspect of the situation. The
consumers buying luxuries is
not a free market at all.
One free market is between
the Payers and the producers.
That free market has producers
selling net benefits to the
Payers. Every payer can pay
every producer and every producer
is selling the same product,
benefits. This free market
works exactly like any other
free market.
The other free market has
Payers selling satisfaction
to consumers for social rewards.
Any consumer can reward (or
punish) any payer. This market
is completely subjective but
quite powerful nonetheless.
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