ABSTRACT
A basic question is whether prices in the market represent social values properly. Market prices are in a sense social valuations, reflective of people's demands and the relative scarcities of the resources required to respond to those demands. Economists critical of government-controlled prices speak of competitive market prices as scarcity prices, implying that they represent true social valuations. Then they admit that some social valuations are not adequately represented in even perfectly competitive markets, let alone in actual markets. What are called "externalities" are admittedly not registered in markets. These include the values of what are termed "public goods." Of course, all sorts of social benefits and costs are external to the producing firms.
