Every resource we deal on earth has a perishable quality to it.
How do we therefore price
a) Milk, when the number of cows at the farm have a life span
b) Electricity, when coal mines are quantifiable to a reasonable extent
c) Medicines, when side effects arise
d) Education - for fun let's take the CFA certification; when capital markets expand and shrink because of regulations, biz cycles etc.
e) Wheat - when harvests suddenly hit the market causing a flooding
Attempts to pad up prices with innocuously appealing objectives like 'unfair markets', 'inefficient nature of markets' etc have come and gone in different avatars. If you want to try price setting in a different system then we can look at Russia where complex math was used to 'price' resources.
The only workable system - is the prices set by free markets. The millions of individuals voting every day, and the crawling of those prices through the layers of productive activity.
Instead, we should be addressing distortions in the functioning of free markets such as
a) Oil - global prices influenced by cartelization
b) Interest rates - Fed and Central Banks sit in judgment on the price of money that should rule in the economy
c) Lobbyists - lobbying lawmakers to protect their industries or pass laws against competing industries (impose a tariff or tax or limit expansion)
The romanticizing with algorithms to fix prices that claim to take into account factors, that presumably, the market ignores shouldn't be taken too seriously.
I say presumably because how do we presumably know that oil at $50 doesn't take into account its 'limited' supply nature? How do we know that oil at $50 isn't discounting the low price of batteries as a source of power 50 years from now?
Also, who is going to pay for the padded up portion of price above the natural market rate? Does the producer get to pocket the higher price? In which case it's a market distortion. More producers will arise, resulting in stress on input resources. Will the government pay? If yes, that means the taxpayer will be burdened. These are questions which came up instantly in my mind as I was reading this.
I don't want to call this Series a prelude to a new 'communist manifesto', but coming from India, which experimented with socialism for the last 60 years, and having seen the benefit of free market capitalism since 1990, I know for sure which side I want to stand on.