First, why is price radically subjective? Consider the “value” or “price” of a soybean. What is the “correct” price for a soybean? Should it be based on the labor that went into producing it? The “value” of the underlying resources? Both of those would produce tautologies. After all, that would require knowing the correct pricing of labor or materials in the first place.
The price of something is what someone is willing to pay for it. That means that the value of a soybean for someone that doesn’t like soybeans is much lower than someone that does. It is higher for someone that is hungry than for someone that just ate. It is higher for someone where soybeans are rare than plentiful. It varies from person to person from place to place from time to time but the millisecond. If you gave a team of economists the world’s largest supercomputer they could not, even in principle, calculate the value of a soybean even one millisecond in the future. We know this for a fact because commodities traders hire economists and mathematicians by the fistfuls and still are not able to correctly predict prices with precision. The price of a soybean is affected by whether rain was accurately predicted in Saigon 3 months in advance. It is impacted by a tofu companies’ marketing campaign. It is literally affected by everything else in the world simultaneously.
There is no central planning authority that could come close to adequately determining the price. This is one item out of millions. The idea that a market, or multiple markets, “lacks speed and synchronicity” is exactly backward. Market prices can change billions of times a second. It is precisely central planners that lack speed or information to adjust.
Only the free interaction of people is able to determine prices through the mechanism of the market. Any 3rd party that interferes with the free exchange of goods and services damages that subtle price mechanism and is very close to the definition of an externality. Externalities are only satisfactorily addressed by the market.
The classic example in every economics textbook of an externality is bees pollinating a farmer’s field. It goes like this: the bees are providing a service by pollinating the field that is not adequately compensated because the value is not captured by the market. Nonsense! First, the opposite could be said as well. The bees are snacking down on all that lovely pollen without paying either. It is mutually beneficial. And besides, there is a rollicking market for pollination. Today I drove past an apple orchard that had a truckload of beehives that they had paid to visit the orchard to pollinate the trees. The beekeeper is paid by the orchard (and the bees are paid in pollen).
The same is true of air pollution. As countries first claw their way out of grinding poverty, they pollute more to be able to enjoy some of the features of a developed country like heating, light, and transportation. At first can only afford dirtier sources of energy. As countries grow rich, they increasingly value clean air and environment. This is why the US has had a decrease in air pollution (including CO2) on a per capita basis since 1975. The primary externality in relatively free markets are governments. Without government intervention, we would all have much, much less CO2 pollution, at least in the US.
I thank you very much for indulging my thoughts in this important conversation. I know it is in some ways tangential to Dhamma, but it is critically important in most people’s lives.
By the way, I see by your profile that you are Portuguese. My family and I were supposed to be in Portugal for the first time this week, but we had to cancel our plans because of the virus. Too bad!