Have you ever listened to a classical symphony and thought the music needed more distortion? Or have you ever read a newspaper and believed it would have been improved if it had more disinformation? Most of us don’t appreciate distortion in our music or disinformation in our news. Yet far too many do favor distortion and disinformation when it comes to pricing.
Prices signal information in markets. A “market” is a summary term for a variety of voluntary exchange for tangible commodities or nontangible services. In fact, one of the most important functions of a market is to use pricing to serve as an information system (creating, collecting, filtering, processing, and distributing information). When we describe a market as a “free market” one of things meant is the prices are largely free of distortions and disinformation.
This is one of the main reasons free market advocates oppose government subsidies: they inject distortions and disinformation into the pricing system. Almost always, the distortions result in an advantage of the strong over the weak, the big over the small, and the rich over the poor.
A prime example is government subsidies to farmers. During the Depression, the government began subsidizing crops to save family farms. But now the program costs billions, benefits big agricultural companies, and can even harm family farms.