Price Theory
Price Theory by Milton Friedman, published by Transaction Publishers in 2007, is a comprehensive exploration of the principles underlying economic interactions. This first edition spans 357 pages and is presented in English. The book distinguishes between positive and normative economics, addressing how economic problems are solved and how they should be approached. It delves into the critical aspects of price theory, focusing on resource allocation and the relative pricing of goods, while also discussing the broader implications of economic behavior within society.
Readers will find that Price Theory examines the role of prices in transmitting information, incentivizing resource users, and guiding owners in their decisions. The text emphasizes the interconnectedness of individual behaviors and societal outcomes, illustrating how economic solutions emerge from cooperation among individuals. By addressing both monetary and price theory, Friedman provides a framework for understanding the dynamics of economics as a social science, making this work a significant contribution to the fields of business and economics, particularly microeconomics.
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Economics is sometimes divided into two parts: positive economics and normative economics. The former deals with how the economic problem is solved, while the latter deals with how the economic problem should be solved. The effects of price or rent control on the distribution of income are problems of positive economics. The desirability of these effects on income distribution is a problem of normative economics.
Within economics, the major division is between monetary theory and price theory. Monetary theory deals with the level of prices in general, with cyclical and other fluctuations in total output, total employment, and the like. Price theory deals with the allocation of resources among different uses, the price of one item relative to another.
Prices do three kinds of things. They transmit information, they provide an incentive to users of resources to be guided by this information, and they provide an incentive to owners of resources to follow this information. Milton Friedman’s classic book provides the theoretical underpinning for and understanding of prices.
Economics is not concerned solely with economic problems. It is a social science, and is therefore concerned primarily with those economic problems whose solutions involve the cooperation and interaction of different individuals. It is concerned with problems involving a single individual only insofar as the individual’s behavior has implications for or effects upon other individuals. Price Theory is concerned not with economic problems in the abstract, but with how a particular society solves its economic problems.
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