Markets Don't Fail - Part III
The Fallacy of Pricing Power
On July 26, 2025, Forbes published a book review - written by John Tamny, of The Moneyball Method. It was also published on July 18, 2025, at RealClearMarkets.com. This brief essay will focus on a quote from the seventeenth paragraph:
Consider the myth of so-called “pricing power.” Reporters, pundits, and economists talk about it, believe it’s real, but since money in circulation reflects production while attaching a money price to market goods, the rational can see that it’s not. As Shupe notes, “prices are information and new sellers will continuously enter the marketplace to capture some of that business.”
For the essence of that passage, consider this: the rational see that “pricing power” is not real. But who are “the rational?” And what is “pricing power?” The opening paragraph of Chapter Two of my book reads: “Pricing power belongs to producers with the ability to raise prices without losing customers or lower prices without losing profits.”
And broadly speaking, rational people are reality oriented, mentally focused and emotionally balanced - and they know that healthy emotional responses are the effect of being reality oriented. And in the context of the price mechanism, the rational see that sustainable pricing power is not real.
To the reporters, pundits and economists who speak of it as the inevitable consequence of the profit motive, pricing power is a phenomenon to be addressed and forcibly controlled. And for that they must rationalize - and that is not rational. But just as you have agency, “prices are information and new sellers will continuously enter the marketplace.” The language is confusing, but to rationalize is to use logic without the benefit of evidence.
In other words, rationalizations are not reality oriented. And to better explain how this happens, Chapter Four of my book relies on psychologist Edwin Locke,
Determinism is the doctrine that everything we think, feel, believe and do is caused by factors outside our control – that we have no choice regarding our character, our thoughts, our actions, our lives.
But you have agency, “prices are information and new sellers will continuously enter the marketplace.” Explaining the contradiction, Dr. Locke continues, “If determinism claims that you have no choice about your actions or thoughts, then determinism applies to your belief in the doctrine of determinism.”
However, today’s cultural aversion to the virtues of money and information of prices is the cause of irrational ideas such as “pricing power.” And the goal of those who originate those ideas is to negate the independence of productive minds while reaping the profits created by them. That is a contradiction, but there are no contradictions in reality. To learn more, please click the link below:
https://www.amazon.com/Moneyball-Method-Middle-Class-Manifesto-Objective/dp/1696009111/