“I would hazard to say that anyone who considers himself a member of the left, or even a friend of humanity, finds it unacceptable that some people should be unable to afford food and shelter in a wealthy industrialized society. That much is not in question. There are, however, two importantly different ways of looking at the problem. If some people cannot afford food and shelter, the problem could be that these things are too expensive, or it could be that some people don’t have enough money. Similarly, there are two ways of solving the problem: the first by changing the prices, the second by supplementing people’s income. Yet for some reason, people have a tendency to overlook the second option. This results in a pattern of reasoning that we might refer to as the “just price” fallacy, whereby prices are directly blamed for injustices that arise in the pattern of distribution, ignoring the effect of endowments.
The almost unanimous preference among economically sophisticated leftists is to let the market set prices in cases where a reasonably competitive market can be organized, and to tackle distributive justice problems from the income side.

“I would hazard to say that anyone who considers himself a member of the left, or even a friend of humanity, finds it unacceptable that some people should be unable to afford food and shelter in a wealthy industrialized society. That much is not in question. There are, however, two importantly different ways of looking at the problem. If some people cannot afford food and shelter, the problem could be that these things are too expensive, or it could be that some people don’t have enough money. Similarly, there are two ways of solving the problem: the first by changing the prices, the second by supplementing people’s income. Yet for some reason, people have a tendency to overlook the second option. This results in a pattern of reasoning that we might refer to as the “just price” fallacy, whereby prices are directly blamed for injustices that arise in the pattern of distribution, ignoring the effect of endowments.

The almost unanimous preference among economically sophisticated leftists is to let the market set prices in cases where a reasonably competitive market can be organized, and to tackle distributive justice problems from the income side. As the great socialist economist Abba Lerner once put it, the problem with the poor is not the prices that they have to pay, but that they have too little money (hence his realization that “the solution of poverty lay not with the manipulation of prices but with the distribution of money income”6). Yet for some reason, the temptation to pursue distributive justice objectives through the manipulation of prices remains almost irresistible for the left. (Thus Jack Layton and the NDP are not only the chief defenders of cheap gas, in times of shortage, but also of cheap housing, cheap tuition, cheap banking services, cheap anything-that-the-poor-happen-to-consume-some-of.)”

Excerpt From: Joseph Heath. “Economics Without Illusions.” iBooks. https://itun.es/us/Gsw_y.l

print