From Cafe Hayek I read (and comment on here since the site does not allow such there):

The two shillings of a poor man are just as good as the two shillings of a rich one; and, if we interfere to prevent the commodity from rising out of the reach of the poorest ten, whoever they may be, we must toss up, draw lots, raffle, or fight, to determine who are to be excluded. (Malthus)

Market prices are not arbitrary.  Prices are determined by the forces that economists comprehend with the theory of supply and demand.  An attempt by government to change a price or wage from what that price or wage would be without government price controls at best masks the true price or wage – in the way that dressing up a woman to look like a man at best changes the woman’s outward appearance without altering her chromosomes.  (Many proponents of minimum wages and other price controls – those proponents who deny that such price controls generate negative effects – are victims of the primitive superstition that the superficial appearance of something is the essence of that something.) (Cafe Hayek)

First. Malthus is talking about that the purchasing power at the present moment, next touching upon rationing in the case of a price ceiling put on a good. Initially it is true in that is the purchasing power of two whomever the party that holds those two shillings, though the equal value of these ends there: For the poor man, there are immediate needs to be met – acommodation, food, clothing. This means that for a person with meagre or no savings, the money is his hand is likely to be gone very soon. On the other hand, the rich man (what that word means precisely I won’t go into here, lets just go with ‘loaded’) has his needs well covered, and the money is his hand does not immediately need to cover life necessities, which means they are likely to go into investments, yielding stock dividends, sales profits and other capital income. In short, the money for the poor man will be consumed away rapidly while that of the rich man will accumulate and likely result in linear or even power-law returns (for the while there are no precipituous market crashes).

So no, the two shillings are not the same for two different men (or, I’m afraid to say… men of different classes).

Second. Dan Bordeaux (the owner of blog CF) says that market prices are not arbitrary. That much is true. How goes on to say that prices are formed by laws og price and demand, which is likewise true, but treading into fuzzy terrain, since the immediate snapshot of the D-S curve is that of a continuum (sounds so ice, that word), or you can visualize it as a stretched box whith two lines dancing about within it.

And on the border, and outside that box are conditions and forcings (swiped i from climate science 🙂 upon it that are not known to the experts studying the economic observables inside the box, or the forcings are not well percieved or improperly understood by them.

As for the true price – what is true in the economic sense? The equilibrium price in a world where government influence completely wiped away? So, in the present moment or an arbitrary time in the future How about a government-less world where a monopolist/cartel has attained enough market power to be price makers instead of both sides of the D-S world being price takers (the idealized free market)?

(There is of course the case where government has too much influence on price and where it itself, if not actively becoming a supplier of a certain good, ie. direct market participation, becomes an external price maker. It is this state of affairs that the Austrians object to, and often they are right, but that’s me digressing)

As some of you may know, the Austrians do no take into consideration the economic singularity of natural resources: That they are exhaustible and that those who sit upon them are price makers, ie. have an inordinate market power – or one ultimate so, as shows in the notion of hydraulic despotism.

So that is the free market. To even out these inordinate amounts of market power is not just preventing government from overreaching, or prevent excess capital accumulation amongst the superrich, but it is indeed to prevent the ‘free market’ from turning the world and its population into a free-for-all for the diminishing resources, in which an increasing population (again very Malthusian) will fight harder and more frenetically for lesser and lesser scraps thrown in a calculated manner from the hands of those at the top of the pile.

The freed market will be ones where these (destructive) imbalances are more or less evened out.

Whereas the free market is essentially devoid af an activist government (or any at all), and the population reduced to mere economically-acting (ala Rand’s “Galt’s Gulch”) entities, the freed market needs some degree of intereference from government, and activism and collective action of its citicens. (While it is unpalatable for me to say so, the interference on government level does most likely not be limited to evening out the common resources.)

In closing, Dan makes the same mistake that Thomas Schelling commented on in 1978*, which is that an equilibrium isn’t particularly attractive, which is to say that just because there is an equilibrium achieve for a given good, does not necessarily mean that it is exactly godd, purposeful or satisfying, ie. that it serves a specific purpose (well) for either exchanges in that particlular good, or in the economic environs  surrounding, and perhaps dependent on that.

As for mistaking an apparence for the essence, I’d say Don has fallen into that trap, as well. The free market is that – on the surface.

*Micromotives and Macrobehavior, page 26, Norton Edition.