Understanding The Difference Between Price And Value; Product And Benefit

Michael Masnick, TechDirt, Aug 21, 2008
Commentary by Stephen Downes

This is an important point that is routinely glossed over in the news. The price of an object is independent of its value. Rather, price reflects what people are willing to pay. This, in turn, is impacted by supply and demand. That's why (contra mainstream news reports) companies cannot simply 'pass on to the consumers' increases in their costs. Additionally, lowering costs (by, say, lowering business taxes) are not passed on to the consumer for the same reason. And it's also why you can't make the link between how much work was put into a product, or how important it is to society, and what it costs on the marketplace. This disassociation between price and value is the reason why the distribution of important goods cannot be left to purely market forces.
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