Home > Uncategorized > Towards a ‘periodic table of prices’

Towards a ‘periodic table of prices’

I do not have ‘physics envy‘. I do not want economics to look too much like physics. But I do have chemistry envy. I want economics to have something like the magnificent periodic table of elements, for prices. Input prices, output prices, mark up prices, shadow prices, market prices, administered prices, government prices, expenditure prices, asset prices, monopoly prices, monopsony prices – all of these and many more neatly ordered in a relatively simple table. Somebody still has to write the book about it but there sure are elements available. One can think of the work on prices by Frederic Lee. Or about the work of Gyun Cheol Gu, who provides us with this extremely useful overview of ideas about pricing (PK means: Post Keynesian):

Interestingly, the ‘Post Keynesian’ approaches to pricing are fully consistent with business economics (see the overview below, also by Gyun cheol Gu).

Of course, these methods have changed over time, leading to different prices – economics itself has become an agent of change when it comes to pricing. Why is this important? As Nathan Tankus argues, the present inflation can’t be understood without having a good grip on the nature of prices and pricing. I agree. Somebody gains from present day inflation, without knowing the cost structure or retail prices it’s difficult to find out who. There sure are struggles going on about wages and profit shares – which in the end show up as a particular structure of prices, as showed by people like Dean Baker. Also, economists sometimes seem to attach a kind of mythical value to prices – but looking at them from the angle of cost calculation shows that they are just monetary constructs. Shadow prices do not exist – but they do. They are invented and calculated by economists and sometimes enter economic policies, making these dreamed up prices real tools of power, The analysis of such situations becomes, I think, easier when we have the periodic table of prices. The elements are there, steps have been made, but we’re not there, yet.

  1. July 13, 2022 at 12:32 am

    Pricing includes costs plus a profit. Extra good profits stimulates competitors. That is a still valid yet older economic thought that remains unable to measure environmental, social or political decline in a price.

    I see a new facet of government employing a veritable army of our youth calculating the actual cost of goods and services. The data generated will be what informs the economic/environmental facet of a modern seven facet government interacting with the other facets. Education will need much greater funding to supply the trained personnel for this huge life-saving modern task.

    • Blissex
      July 13, 2022 at 7:19 pm

      «Pricing includes costs plus a profit.»

      That is tendentious: it includes cost plus *value added*. Then how value added get split between wages, land rent and business rent (“profits”) is a rather separate matter, in large part a matter of political power.

      «our youth calculating the actual cost of goods and services.»

      Cost accounting is one of the great intellectual challenges of the ages, and costs cannot be simply calculated. Almost all types of Economists and political economists greatly underestimate (in the rare cases where they bother thinking about it) the intellectual challenge and importance of cost accounting, using often simplifying assumptions that simplify way too much (especially the Economists who believe in Arrow-Debreu-Lucas or DSGE models).

      • merijntknibbe
        July 13, 2022 at 8:21 pm

        Indeed: ‘costs cannot be simply calculated’. The method used influences the result and, hence, also value added and hence also the amount of value added split between wages etc…

  2. Romar Correa
    July 13, 2022 at 7:37 am

    Grateful, merijntknibbe. Those who construct input-output tables of different kinds seem to suffer from ‘technical coefficients bias’ in their ‘matrix algebra envy’. At best, we have accounts in terms of “widgets”. Paying serious attention to the associated prices will be illuminating. They must be “monetary constructs”, not real prices. Attaching the dimension of vectors of prices to physical input-output tables will surely educate. To your “chemistry envy”, I add my ‘accounting envy’!

  3. yoshinorishiozawa
    July 15, 2022 at 3:06 am

    It is true that economists pay little attention to pricing, costs, and accounting. In another page in this blog, we are discussing how to bring economics more evidence-based one. See my proposal: Agenda for constructing evidence-based economics.

    In a post on July 1, 2022 at 1:13 am, Michael Joffe, whose handle-name is “evidence-based economics,” made this comment:

    An example is price setting – quite an important topic for economics! I’ll pass rapidly over the neoclassical view that the ideal economy (!! – a normative idea masquerading as positive economics) is made up of price takers, so that apparently there is no possibility of anyone actually setting prices – it is too ridiculous to spend time on. But there is little in the literature that I’ve been able to find that gives a realistic account of price setting. An alternative, based on “prices of production”, is also problematic, because the various versions of this idea include the idea of a “general rate of profit”, which has been rejected as an unrealistic concept, e.g. by Machover. My statistical analysis of profit rates (currently in revision) confirms Machover’s point: although one can of course calculate an average profit rate, it doesn’t correspond to anything real, it only has an abstract meaning.

    See also my response on Post Keynesian price theory.

  4. July 16, 2022 at 3:07 pm

    Reblogged this on Calculus of Decay .

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