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Victor Niederhoffer

Price as Rationer

05/31/2004

Most of the media, most of the hate-America crowd, most of the followers of the Sage, most of the agrarian reformers have not taken an economics course in recent years, and are unaware of the supreme function of price, to harmonize the demand and supply for a commodity so that there are no shortages.

I.e., higher prices create greater supply and rationing of demand, and lower prices create higher demand and lower supply (movements along the existing curves as well as appropriate shifts to the rightward in the long term supply curve when prices rise, and to the leftward when prices fall, along with appropriate harmonizing movements in the long term demand curve via substitution effects.

A reading of Heyne or Pashigian or Stroup is desirable so as not to be completely old-hearted and overtly ignorant of principles.