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The Price System: Pelicans, Professors, and Murders

Oct 26, 2010 • Demand, Supply, and Markets, Environment, Thinking Economically • 240 Views    No Comments

Is a pelican worth $500? What is the value of a college professor? What does a murder cost us? Sometimes it’s tough to get a price.

We know that BP owes money for wildlife lost on devastated wetlands. But how much? USA Today tells us that 2263 “visibly oiled dead birds” have been counted. A Planet Money podcast suggests that the $500 price tag for rehabilitating a pelican after the spill could indicate their price. Or maybe it’s the rate sheet for animal actors. Flying birds command $4500 a day (non-flying $1500).

For college professors, the WSJ says that Texas is trying to calculate cost and benefit. The easy part is salary and expenses. The tough part is the benefit. Who is worth more, the researcher who attracts a million dollar grant, the philosopher, or the teacher who creates human capital that transforms the world. Aiming for fiscal prudence, some universities are looking for answers.

One researcher tells us that one murder can cost society $17 million. Accurate? It all depends on whether you try to price the lost life, justice, prison, even new commuting routes when a sniper is sought. Why does it matter? Maybe it would be much more cost effective to do a better job preventing murders.

The Economic Lesson

The lesson here is not to take prices for granted. The price system provides crucial information. Prices tell us about value and efficiency and affordability. They let consumers and businesses and government decide what to do, what not to do, and what we can do better. Yes, “Absence makes the heart grow fonder.” Maybe we care more about prices when we cannot have them.

Please note this post was slightly edited after it appeared.

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