Price and Value

Prices that are too high or too low are problematic.

By Luigino Bruni

Published on on 5/05/2010

In almost all airports of the world, you can pay to get Internet service. In Zurich, with one Euro, you can be connected for 4 minutes: almost all the booths were available.  A few days ago, in Porto, I found free Internet service in the airport. I waited in line for more than an hour, and then I gave up because those using the booths were not moving. Maybe if the cost in Zurich was a little less, and in Porto a little more, the efficiency of both systems would improve. 

Prices that are too high or too low are problematic. Oil prices that were too low for decades not only accelerated the exhaustion of natural oil deposits, but it also slowed down research of alternative energies. The price of a good, when markets are competitive, should express its economic and social scarcity; but there are goods like oil (and in general, the environment) where, so that their prices truly show their scarcity, we should include the availability of that good for future generations. 

Then, talking about prices that are too high, I still haven´t found an economist colleague who can give me theoretical justification for CEOs´millionaire salaries. I´m convinced that if we paid private and public directors, based on the scarcity and the value of their contribution to a business and to the society, we could reduce the cost of goods, policies and bills that rise because members of these exclusive clubs decide their income on their own.  Lower salaries would then favor cohesion and social harmony, which are always put into crisis by strong inequalities. I´m convinced that in the management field there is also need to develop research for "alternative sources". But, also here, as long as the salaries of the directors of large companies and public administration remain scandalously high, it will be very arduous for social and civil economy to attract the best young leaders.  Luckily, however, I know many youth who, while have optimum alternatives, choose to commit their best years to NGOs and to social and civil businesses, where one can find those "alternative energies" on which the social, economic and spiritual sustainability of the next few years will depend. 

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