Lindblom - The Market System - Afghan Journalists' Committee

138 What To Make of Itducing, week by week, new efficiency prices to guide thenext necessary decisions. Between 1880 and 1890, for example,declining American steel prices signaled new opportunitiesfor steel-using industries, with the result that steelproduction rose from 1.25 million tons annually to morethan 10 million. So fast a pace of change is common, particularlyin today’s computer and communications industries.The distinction between arbitrary and efficiency pricesis no small distinction. Arbitrary prices often produceshortages and queues, or even gluts, as they conspicuouslydid in the Soviet Union and China. When governments indeveloping societies hold down farm prices to favor the urbanpoor, the effect on farmers is to discourage the very productionurgently needed or to induce farmers to hide andhoard rather than sell. When electric power is underpriced,people overload and then have to suffer the inconvenienceof blackouts. When irrigation water is wastefully distributedthrough subsidies, the result is agricultural productionnot worth its costs, which include taxpayer payments toconstruct the irrigation facilities. When petroleum, minerals,and other basic resources are arbitrarily priced throughsubsidies, the whole system’s growth may be retarded.When cartels boost the price of milk, the children of theurban poor suffer. When pharmaceutical corporations usepatents to achieve monopoly on newly discovered medications,the costs levied on some needy ailing people may beruinous. Efficiency prices are not simply an economist’stoy, nor an incidental adornment of the market system.They are a fundamental requirement for efficiency in theproduction of services and goods.Efficiency prices are appropriate for a liberal or democraticsociety or any society whose authorities want socialcoordination to proceed as voluntarily as possible. For a