Do Market Prices Reflect Real Scarcity? Theories and Facts

Adolfo Figueroa

Revista Economía, 2019, vol. 42, issue 83, 54-74

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.

Keywords: Market institution; Market theory; Market structure; Market competition; Market relative prices; Natural resources; Scarcity; Capitalism (search for similar items in EconPapers)
JEL-codes: D01 D02 D40 D50 P10 Q50 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:pcp:pucrev:y:2019:i:83:p:54-74

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