Raising the price doesn’t “solve” shortage and no one in economics makes that claim.
Instead, the claim is more limited - that even in times of shortage if you want to make sure that the item in question is still available, raising the price will accomplish two things: it will encourage marginal production and discouraged marginal consumption.
Without prices, the only mechanism you would have to accomplish the same effect, would be a political decision about who did or not deserve to have hard bread, while you work out the production issue.
In both systems, you’re doing rationing, just by different means.
Whether under capitalism or collectivism the way you solve a shortage is always the same - you produce enough for everyone who wants the thing.
The difference is the presence for absence of the feedback mechanisms like prices. The problem with collectivism is that once you get rid of prices, there is no explicit feedback mechanism. There may be implicit mechanisms such as a waitlist, but ultimately the decision to increase production is turned into a political decision. I doubt many people care if production decisions about hard bread are made by politicians or business people, but in more consequential areas, such as housing, we have a century of experience of what happens in production decisions are collectivized and politicized. (it is illegal to increase the national stock of interior residential floor space by even one square foot without prior political approval, I.e. rezoning, variances, etc.)
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Raising the price doesn’t “solve” shortage and no one in economics makes that claim.
Instead, the claim is more limited - that even in times of shortage if you want to make sure that the item in question is still available, raising the price will accomplish two things: it will encourage marginal production and discouraged marginal consumption.
Without prices, the only mechanism you would have to accomplish the same effect, would be a political decision about who did or not deserve to have hard bread, while you work out the production issue.
In both systems, you’re doing rationing, just by different means.
Whether under capitalism or collectivism the way you solve a shortage is always the same - you produce enough for everyone who wants the thing.
The difference is the presence for absence of the feedback mechanisms like prices. The problem with collectivism is that once you get rid of prices, there is no explicit feedback mechanism. There may be implicit mechanisms such as a waitlist, but ultimately the decision to increase production is turned into a political decision. I doubt many people care if production decisions about hard bread are made by politicians or business people, but in more consequential areas, such as housing, we have a century of experience of what happens in production decisions are collectivized and politicized. (it is illegal to increase the national stock of interior residential floor space by even one square foot without prior political approval, I.e. rezoning, variances, etc.)
The GP provided a great example for why metrics are often shit.
Raising the price fixes the metric (is it in stock?) but doesn't fix the actual problem.
Sure, but price is both a mechanism and another important metric.
The problem with the capitalist mechanism here is
- the producer has already repaired the factory that will restore supply shortly, so the signal is effectively useless
- your customers are going to remember that you gouged the shortage situation