Friday, May 16, 2014

A World Without Prices or Profit

I posted this a while back as a forum thread.  I thought I also created a blog entry for it...but I guess I didn't.  Figured I'd create a blog entry for it because it's relevant to the blog entry that I'm going to post next.

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Are prices or profit really necessary? For fun let's try and imagine a world without either.

If you wanted bread, you could go to your local bakery and select the quantity of bread that matched your preferences. You wouldn't have to pay for it...but the employees of the bakery would have the final say on your selection. They would approve or decline your selection when they were scanning your items for inventory purposes.

If you were happy with the experience and wanted to give the bakery positive feedback...then you could go to their website and make a contribution of any amount. Their website would display exactly how much positive feedback (revenue) they received.

When bakeries ordered flour from the same supplier...the supplier would use each bakery's revenue to help determine how to divvy up the flour. More revenue means more flour. Same thing with the wheat farmer. He would look at how much positive feedback the suppliers had received in order to determine how best to allocate his wheat.

Would you have an incentive to work hard? Let's say that you worked in a bakery. If you failed to work hard...if you did not improve on your recipes...if you wasted your flour...if you took really long lunch breaks...if you were rude to the customers...then your bakery would lose revenue and competing bakeries would gain revenue. If your bakery lost revenue then your boss wouldn't be able to give you as much positive feedback.

If you received less positive feedback...then you would have less influence over how society's limited resources were used. You wouldn't be able to give your favorite bands...favorite authors...favorite restaurants...as much positive feedback as you felt they deserved. Plus, your living accommodations and transportation wouldn't be as nice.

So would it work? No prices...or profit...but you'd still have the freedom to give positive feedback to those who were using society's limited resources for your benefit. And the amount of influence you had would depend on how much positive feedback other people gave you.

2 comments:

  1. Cool thought experiment. I believe the world is too complex for there to be no pricing system. Such a world would certainly be less efficient than our own.

    Question: How would such a world allocate luxury goods like precious stones and antique furniture without money?

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    Replies
    1. My entry wasn't sufficiently clear...but money would still exist. You'd still have the same money that's currently in your wallet. In my blog entry I just referred to it as "positive feedback".

      If you cure cancer...then lots of people would give you their money (positive feedback). What would you do with your money? You could give some of it to somebody who supplies precious stones. What does the supplier of precious stones do with his money? He gives some of it to the person in charge of a mine. He, in turn, gives some of it to the organizations that supply his equipment.

      At no point were there any fixed prices. But there was certainly individual valuation. And any organization that inefficiently allocated its resources would lose revenue. So there would still be competition.

      To be clear, I'm not advocating the elimination of prices/profits. I'm just advocating that taxpayers be allowed to choose where their taxes go. Whether this would shrink or expand the public sector is anybody's guess.

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