Price Mechanism Analysis Based On Power

Exchange of commodities and commodity economy is a naturally formed economic linkage form or mode of economic activities of the members in the society when the human society develops to a certain stage. The basic characteristic of the economic form is the relations between people in the social and economic life established by taking the relationship between things as media. Social connections between people in the material production activities must and only be realized through the exchange of commodity by goods exchange. Price, as the exchange medium, plays an important role in the exchange of commodities and the process of redistribution of social resources. As the core concept of economics, the price issue has been largely concerned by many research scholars for long, and the price theory is also an important part of economics theory. In the history of the study of economic issues, the price theory has constantly evolved with the economic development, from the ancient Greek perspective of fair reciprocity, to the price theory of classical economics, until today's price theory of neoclassical economics, price theory gradually consummates. The study of theory has developed from simple description to application of a large number of geometric and mathematical tools. Since classical economic theory, the supply-demand equilibrium has been the core content of price theory, and the equilibrium analysis has been main theoretical tools of study on the price issue. However, with the development of society and the in-depth theoretical study, the traditional price theory analysis method has also exposed many flaws. Whether it is the partial equilibrium theory by Marshall, or the general equilibrium theory by Walras, strict assumption condition makes the theory seriously divorced from the reality, so the theory built on the virtual assumptions is insufficient to explain the reality in question. The neoclassical theories after Keynes accommodated the socio-economic realities, but still paid too much emphasis on the formalization of economic theories, leading to the lack of inevitable relationship between macroeconomics and microeconomics. Price, as a exchange medium, reflects the social relationships between people, but in the neoclassical theory, in order to satisfy the need of form, social interpersonal relationship was changed into relationship between person and goods and even between goods, and it stressed the role of market mechanism and gave up the initiative analysis. The reality of the market is not completely balanced, and non-balanced market is a normal state, which makes the traditional price theory based on equilibrium analysis lose its theoretical foundation.From the Coase's property right theory, information economics and institutional economics have re-interpreted the price theory, which analyzed social resources redistribution process through the impact of information, property right theory and enterprise system. Though the analysis of price theory has broken through the limitation of equilibrium theory, the property right theory in institutional economics has put forward the function of the market power, based on the price analysis of property rights and it breaks through the ideological shackles that only goods are considered in the traditional economics in analyzing price. It discusses the formation of price from some essential attributes contained in commodities, and applies the factors which have important influence on price such as institution, information, strategy and organization to the analysis process of price mechanism, which goes beyond the concept that price is viewed as superficial concept of "product quantity ratio" in traditional economics and re-understood and re-established the implication of price in the economics from the intrinsic right value and equity pricing. Although it also adopts the equilibrium analysis method, its equilibrium is no longer just the commodity "quantity" equilibrium, but a generalized equilibrium. Viewing information as a valuable resource, information economics analyzes its function on the price formation, which has exceeded the commodities supply-demand range, so that people can have a further knowledge on the price formation mechanism. However, those two new theories still analyze the evolution of price by relationship between persons and goods and explain the relationship between human relations by relations between persons and goods. Without exploring this acting from, they did not make a satisfactory answer to the origin and change of the institution and other issues, and naturally they cannot tell the true acting process of the price mechanism either.This paper probes into price formation mechanism from the perspective of power, which has a generalized definition that power is individual or an organization's ability to control and influence other individual or organization based on its resources. This paper, by analyzing power acting form of price formation under different market structure, thinks that power is the core element which plays a major role in running the price mechanism. Power is not only the deciding factor in distributing the social initiative resources but also deciding factor in the process of redistribution of social resources. The operation of society is virtually the social power network of interaction and reciprocity between persons established by behavior actors by the domination of the available resources. Price mechanism is only the representation of the power relations operation in market. The market equilibrium is not based on the material quantity equilibrium, but power equilibrium of behavior actors; although the supply and demand has certain influence on price, the influence is achieved through the function of power, and the supply and demand is the result of the market choice of behavior actors of power. Therefore, the equilibrium price is not the equilibrium of transaction parties in the supply and demand, but equilibrium of transaction parties on the basis of their understanding of their own power under the restrictive conditions of institution and information.This paper is divided into five chapters, and the body part is Chapter Three, Four and Five. Chapter One briefly introduces the nature and function of price and summarizes the understanding the historical development process of price. In Chapter Two, the existing price theories are reviewed; the relevant content of partial equilibrium theory, the theory of general equilibrium and non-equilibrium theory are expounded; the new methods and new understanding of institutional economics and information economics in the theoretical analysis of the price is introduced; the limitation of current popular price theory is analyzed. The author believes that demand-supply equilibrium is only the result of market competition rather than the real reason deciding the price, while it is the behavior actor' power that decides the price and puts forward the view of deploring price formation mechanism from power perspective. In Chapter Three, power and related content in market are analyzed comprehensively. First of all, the author gives the definition and meaning of power and points out the interdependent relationship of power and market resources. Resources are the foundation of power and power is the guarantee to re-access to resources. Secondly, the foundation of power forming is discussed from primary resources and derived resources two respects. Power, power subject and acting form of power are analyzed and described. The author also points out the market competition is no only the competition between supplier and demander, but also the interaction of government, manufacturer enterprises and consumers. The government's anticipation in deciding process on price precisely shows that price is not result of the quantity equilibrium between demanders and suppliers. In Chapter Four, market price formation mechanism is analyzed based on power. The author redefines the understanding of rational assumption in economics and believes the economic subject's rationality is not the maximized short-term gains, but the pursuit of self-control on the market, that is, the maximized power, and thus puts forward the power decisive hypothesis of price. In addition, the paper also analyzes the evolution process of power equilibrium in different market structures, and analyzes price formation mechanism in markets of different structures from power perspective by taking equilibrium method. It also demonstrates that power is the decisive factor of price, and the market equilibrium price is actually the result of the equilibrium of power. In Chapter Five, based on the previous chapters, the price issue of the Chinese real estate market is analyzed. It points out that the root cause of the rising of real estate price is not conflict between supply and demand, but an imbalance of power among the parties in the market, the inevitable result of the too much power of government and developers. It also points out that the condition which guarantees reasonable market price is power equilibrium between different subjects and the equity of responsibility and right of the same subject. Based on understanding these, rationalized proposals are put forward on how to regulate and control the real estate price.To sum up, the major innovations of this paper are as follows:â‘ The meaning of economic rationality is redefined. Economic rationality in traditional economic theory is consumers' pursuit of maximized individual effect and manufacturers' pursuit of maximized investment interest. The author believes that whether the enterprises or consumers, behavior subjects pursue long existing in the market, thus the concern about the long-term development of enterprises makes the meaning of economic rationality is no longer the largest current income, but the largest current and expected income, which is related to the current individual's control power of market. Therefore, the pursuit of the control of market, that is, the pursuit of maximized power is the rational choice of economic subjects.â‘¡This paper analyzed evolvement process of different market structural, although it analyzed with equilibrium method, variables are power besides supply and demand. It analyzed price mechanism based on power, some localizations of equilibrium method are broken. It gave a new way to study price.â‘¢This discussed some questions of realty price of china, it analyzed real reasons of realty price rising so fast, and point out the reason that control measures of government isn't effective. Government don't understand main question of realty market, The real reason is that power between supply and demand is unbalance, so settle measure must adjust power structure of market.