Stephen Monrad

I’ve spent a lot of time blogging about value and pricing without reaching any clear conclusions. Right now I want to drop back and remember why I am so concerned about prices in the first place.

The problem with letting prices be set by market forces is that they tend to rise when the economy is close to full employment. This much is clear and uncontroversial. What I want is to find a way to control prices directly so that the economy can be run at or very close to capacity without causing inflation.

My solution was to focus on pricing the inputs labor, raw materials, and capital in a sensible way. I would then build the prices for goods and services based on the labor, raw materials and capital used to produce them.

I still think that focusing on the prices of inputs is the right place to start. There are far fewer inputs to worry about than outputs.

What I want to do at this point is to consider less egalitarian approaches to setting prices for labor, raw materials, and capital. If we want full employment, we can’t let the prices be set freely. However, there may be ways to set them where more variation can be allowed. The egalitarian approach was appealing to me. There may, however, be better pricing mechanisms for inputs that can provide better incentives.