Prices have a twofold function in the planning of capitalism. First, they enable the individual planner of capitalism to perform economic calculations. That is, they enable him to compute the money cost and/or money revenue of various modes of conduct. They tell businessmen to produce the products and use the methods of production that are anticipated to be the most profitable. They tell consumers to consume in the ways that, other things being equal, occasion the lowest cost. And they tell wage earners to work at the jobs that, other things being equal, pay the highest wages.
The second, corollary function of prices is that they coordinate the plans of each individual under capitalism with the plans of all other individuals. That is, prices serve to make each individual adjust his own plans to the relevant plans of all other individuals in the economic system.
Source: Capitalism: A Treaty on Economics (1998) by George Reisman.
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1 comment:
Then who is the ultimate beneficiary?... In reality Capitalism is mad race by each person/ segment to earn more and more and nothing else.... This is my life's understanding of this system...
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