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Do Market Prices Reflect Real Scarcity? Theories and Facts

Author

Listed:
  • Adolfo Figueroa

    (Professor Emeritus of Economics, Pontificia Universidad Católica del Perú, Lima, Perú)

Abstract

Do market relative prices reflect real scarcity of resources? If this were so, market prices wouldprovide society with the correct signals about real scarcities. Economics—the science of scarcity—has different answers to this question. Following the principles of current epistemology, the paper reviews three theories of markets: neoclassical, bio-economics, and unified theory, analyzing their assumptions, their derived empirical predictions about the relation between market prices and scarcity, and their validity when confronted against known basic facts. Clarifying misconceptions about the nature and the role of the market mechanism in the functioning of capitalism is the expected contribution of the paper.

Suggested Citation

  • Adolfo Figueroa, 2019. "Do Market Prices Reflect Real Scarcity? Theories and Facts," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 42(83), pages 54-74.
    • Handle: RePEc:pcp:pucrev:y:2019:i:83:p:54-74
    as

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    File URL: https://revistas.pucp.edu.pe/index.php/economia/article/view/21151/20887
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Market institution; Market theory; Market structure; Market competition; Market relative prices; Natural resources; Scarcity; Capitalism;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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