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Quote 1003,1004

Fourth, prices help us maximize value and minimize cost. It is because people value the same goods differently that they are prepared to exchange them in market transactions. Each values more what the other has than the thing they have to give up to get it. We should not fall into the trap of supposing that because a pair of shoes (say) sells for a particular sum of money, that this price equals the value of the shoes. Value is personal. The person selling shoes values the cash more than the shoes; the buyer values the
 shoes more than the cash.
What prices do summarize, though, is the quantity of one thing (shoes) that people in the market are in fact prepared to sacrifice for another (cash). Prices are the going rates of exchange between different goods. And they send out important signals to market participants. If the price of something rises – for whatever reason – it prompts buyers to use less, and switch their spending to things they value more; and it prompts sellers to produce more, and enjoy the extra money. Thanks to the crucial information sent out by the price system, buyers and sellers automatically adjust their choices to the new reality, and the activities of millions of people are coordinated.
Fifth, competition is a discovery process. Markets are not perfect.
 Indeed, it is the imperfections that drive them.

   --  Dr Eamonn Butler

The opportunity to sell us goods gives some people in poorer countries their start on the road to economic growth. The wages, which might look like “subsistence” to us, look like survival to them.
To ban cheap imports is to leave us paying more than we need for goods which we cannot sell in the rest of the world.

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Fair Trade

Quote 965

Countries do not stay poor because we all pay too little for our coffee. Coffee responds to market forces, and some of these countries over-expanded production, with an increased supply that caused a price fall. Some have sensibly moved into added value, doing the processing, packaging and branding themselves for greater returns. If 'fair trade' keeps more basic coffee-growers in business, it contributes to that over-supply and depressed price.

   --  Masden Pirie


Subpages (2): Globalisation Mercantilism