people and prices

Is it bad or unhelpful that people respond to prices? Low prices bring out certain behaviors, high prices others.

The high price of gas is an example. It has changed people's behaviors. When the price was at its peak a few weeks ago, over US$ a gallon, people began to steal - from gas stations and even from syphoning gas out of the tank of someone else's car during the night. The car belonged to the wife of a local sheriff and was parked overnight in the family's driveway.

And, driving by Americans is down since gas prices rose. Car buyers have switched their preferences away from SUVs to more fuel efficient cars and fuel hybrids. This change in customer values brought on by price has brought great revenue losses to General Motors and Ford.

But if we as a species were not price sensitive, would the alternative be any more constructive? Consumers would have no power in markets to discipline producers and other sellers as to product and service preferences. The consumer is price sensitive as are the sellers. Both are therefore under discipline.

When price plays no constraining role in market decision-making, irrational exuberance can set in with harmful consequences.

Further, where administrative fiat not price determines what is produced and use, there is immediate recourse to political or theological tyranny and an evaporation of human freedom and personal dignity.

So, prices give markets and capitalism a bad reputation - turning goods, services, and individual hopes and ambitions into mere commodities, stimulating greed, forcing cost cutting and job eliminations or transfers to other communities - but we would pay a moral price for not having market prices I think.

Risk aversion - the instinct to get the best out of any situation - is a trait that does advance the cause of human civilization and happiness.