Prices the key to solving many issues

THE EDITOR: What is the common factor connecting delinquent HDC renters, inadequate food for soldiers, and teachers not supervising primary school students outside their stipulated working hours? In a word: prices.

More precisely, each of these problems has been caused by the absence or distortion of pricing. In any economy, prices act as signals to producers on what to produce and how much to produce.

If a good rises in price, this indicates a shortage and so producers make more of that good, which then causes prices to fall, with the low price now indicating an oversupply of the good.

This is why all communist and socialist economies have always descended into chaos, since prices are determined by the interactions of buyers and sellers and cannot be dictated by some central authority.

So HDC homes have been supplied below market cost, hence leading to high demand and inevitable shortage. However, because HDC homes are built for political gain rather than profit, the occupiers have no incentive to pay their rents or mortgages on time since they are just as aware as Prime Minister Dr Keith Rowley that politics will prevent them paying the price (ie losing their home) that would be extracted in the private home market.

Similarly, if soldiers had to pay for their meals, the “macaroni pelau” situation would not have arisen. After all, there is nobody else in the country earning a soldier’s salary who is not eating adequate and varied meals.

And teachers in the nation’s public schools all get paid the same salary no matter whether they are good, bad or indifferent. But if their performance was linked to pay levels, then there would surely be sufficient teachers willing to supervise after hours in order to earn extra money or merely to solidify their professional reputation with the expectation of long-term rewards.

Prices, therefore, are the key to solving these and many other issues. The challenge is how to insert a market system within these sectors.

ELTON SINGH, Couva