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{{short description|Economic system}}
{{Economic systems sidebar|coordination}}
In [[economics]], a '''price system''' is a system through which the [[Economic value|valuations]] of any forms of property (tangible or intangible) are determined. All societies use price systems in the allocation and exchange of resources as a consequence of [[scarcity]].<ref name=":0">{{cite encyclopedia | url = http://www.britannica.com/EBchecked/topic/475822/price-system | title = Price system | author = [[George J. Stigler]], [[William J. Baumol]] | encyclopedia = [[Encyclopædia Britannica]] | access-date =2 January 2018}}</ref> Even in a barter system with no money, price systems are still utilized in the determination of exchange ratios (relative valuations) between the properties being exchanged.

A price system may be either a [[regulated market|regulated price system]] (such as a [[Fixed price|fixed price system]]) where [[Administered price|prices are administered]] by an authority, or it may be a [[free price system]] (such as a [[market system]]) where prices are left to float "freely" as determined by supply and demand without the intervention of an authority. A mixed price system involves a combination of both regulated and free price systems.<ref name=":0" />

== History ==
Price systems have been around as long as there has been economic exchanges. 

The price system has transformed into the system of global [[capitalism]] that is present in the early 21st century.<ref>[https://web.archive.org/web/20110728152736/http://www.technocracy.org/archives/185-langan I Am The Price System R. B. Langan Great lakes Technocrat  April 1944, # 66.]</ref> The Soviet Union and other [[Communist state]]s with a centralized [[planned economy]] maintained controlled price systems. Whether the ruble or the dollar is used in the economic system, the criterion of a price system is the use of money as an arbiter and usual final arbiter of whether a thing is done or not. In other words, few things are done without consideration for the monetary costs and the potential making of a profit in a price system.

=== Debate on socialism ===
{{See also|Socialist calculation debate}}
The American economist [[Thorstein Veblen]] wrote a seminal tract on the development of the term as discussed in this article{{tone inline|date=October 2021}}: ''The Engineers and the Price System''.<ref>Harbinger Edition, 1963. LCCCN 63-19639. First Published as a series of essays in [[The Dial]] (1919) then as a book in 1921.</ref><ref>[http://www.faculty.rsu.edu/~felwell/Theorists/Veblen/Papers/Engineers.htm Full Text (HTML)]</ref> Its chapter VI, ''A Memorandum on a Practicable Soviet of Technicians'' discusses the possibility of [[socialist]] revolution in the United States comparable to that then occurring in Russia (the Soviets had not yet at that time become a state (USSR formed in 1922)).

According to Bockman, the original conception of socialism involved the substitution of money as a unit of calculation and monetary prices as a whole with [[calculation in kind]] (or valuation based on natural units), with business and financial decisions replaced by engineering and technical criteria for managing the economy. Fundamentally, this meant that socialism would operate under different economic dynamics than those of capitalism and the price system.<ref>{{cite book |last= Bockman|first= Johanna |title= Markets in the name of Socialism: The Left-Wing origins of Neoliberalism|publisher= Stanford University Press|year= 2011|isbn= 978-0-8047-7566-3|page = 20|quote= According to nineteenth-century socialist views, socialism would function without capitalist economic categories - such as money, prices, interest, profits and rent - and thus would function according to laws other than those described by current economic science. While some socialists recognized the need for money and prices at least during the transition from capitalism to socialism, socialists more commonly believed that the socialist economy would soon administratively mobilize the economy in physical units without the use of prices or money.}}</ref> 

In the 1930s, the economists [[Oskar Lange]] and [[Abba Lerner]] developed a comprehensive model of a socialist economy that utilized a price system and money for the allocation of [[capital good]]s. In contrast to a free-market price system, "socialist" prices would be set by a planning board to equal the [[marginal cost]] of production to achieve [[Neoclassical economics|neoclassical]] Pareto efficiency. Because this model of socialism relied upon money and administered prices as opposed to non-monetary calculation in physical magnitudes, it was labelled "market socialism". In effect, Oskar Lange conceded that calculations in a socialist system would have to be performed in value terms with a functioning price system rather than using purely natural or engineering criteria as in the classic concept of socialism.<ref name="Revisiting the Socialist Calculation Debate">''Revisiting the Socialist Calculation Debate: The role of markets and finance in Hayek's response to Lange's challenge'', by Auerbach, Paul and Sotiropoulos, Dimitris. 2012. Kingston University London, Economics Discussion Paper 2012-6, pp. 1-2: "He readily acceded to the need for efficiency calculations to be made in value terms rather than using purely natural or engineering criteria, but claimed that these values could emerge along lines consistent with neoclassical value theory, without the need for a market in capital goods and without private ownership over the means of production."</ref>

===Hayek===
{{details|Price signal}}
[[Austrian School]] economist [[Friedrich Hayek]] argued that a free price system allowed economic coordination via the [[price signal]]s that changing prices send, which is regarded as one of his most significant and influential contributions to economics.<ref>{{ Citation | last = Skarbek | first = David | title = F. A. Hayek's Influence on Nobel Prize Winners | journal = [[Review of Austrian Economics]] | volume = 22 | number = 1 | date = March 2009 | pages = 109–112 | doi = 10.1007/s11138-008-0069-x | s2cid = 144970753 | url = http://www.davidskarbek.com/papers/HayekNobel.pdf }}{{dead link|date=December 2017 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

In "[[The Use of Knowledge in Society]]" (1945), Hayek wrote, "The price system is just one of those formations which man has learned to use (though he is still very far from having learned to make the best use of it) after he had stumbled upon it without understanding it. Through it not only a [[division of labor]] but also a coordinated utilization of resources based on an equally divided knowledge has become possible. The people who like to deride any suggestion that this may be so usually distort the argument by insinuating that it asserts that by some miracle just that sort of system has spontaneously grown up which is best suited to modern civilization. It is the other way round: man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible. Had he not done so, he might still have developed some other, altogether different, type of civilization, something like the "state" of the termite ants, or some other altogether unimaginable type."<ref name="Hayek45">{{cite journal |url=https://www.kysq.org/docs/Hayek_45.pdf |author=[[Friedrich Hayek]] |title=The Use of Knowledge in Society |date=September 1945 |journal=The American Economic Review |volume=35 |number=4 |page=528}}</ref>

== See also ==
{{div col}}
*[[Free price system]]
* [[Regulated market]]
* [[Planned economy]]
* [[Catallactics]]
* [[Economic calculation debate]]
* [[Economic history]]
* [[History of economic thought]]
* [[Lange model]]
* [[Market economy]]
* [[Price mechanism]]
{{div col end}}

== References ==
{{reflist}}

{{Microeconomics}}
{{Population}}

[[Category:History of money]]
[[Category:Economic systems]]
[[Category:Monetary economics]]
[[Category:Capitalism]]
[[Category:Market socialism]]