I’m something of a cheapskate (or as I prefer to think of myself, prudentially frugal) and so I take special pleasure in finding a good deal. I’m also, by nature, rather grateful and so I frequently thank God for helping me to find goods and services at bargain prices.
But sometimes I remember to step back and be grateful for the larger system God has created that makes such exchanges possible: the price system.
As I’ve said before, a “price is signal wrapped in an incentive to be coordinated by God.” Humans may set individual prices but it was God who designed the price system as a means of coordinating human activity for the purposes of human flourishing.
This isn’t an obvious concept, though, or necessarily easy to grasp. To better appreciate the benefits of the price system, it’s helpful to understand what would happen if it didn’t exist. What if there were no prices? How would you use available resources?
To appreciate why market prices are essential to human well-being, economist Howard Baetjer Jr. from Towson University explains market prices through the railroad thought experiment.
