What are the disadvantages of price mechanism?

Question

this answers will hepl me know more about pricing

Answer 1

Prices reflect the current marginal scarcity of an item, but not necessarily the long run scarcity.  The simple example is a natural disaster where clean water is difficult to come by.  It is suddenly very scarce, but the demand for water is biological, so a price system will trigger a skyrocketing of market prices, even though in the long run, at least in most parts of the United States water is plentiful.  So prices reflect the ability to buy and sell RIGHT NOW and may reflect future prices if that good has a well developed derivatives market.

The other potential disadvantage of a price mechanism is that wages are the price of work, interest is the price of money, and rent is the price to use an asset for a period of time.  It clearly happens that there exist workers whose skills are so low that the value of their labor could only be sold for slave wages.  Paying a fair price for their wages would be no different than enslaving them.  So instead, given a minimum wage, they are perpetually unemployed and perpetually poor, but not enslaved to an employer.  It is hard to say which is worse, however.  So fair prices may be socially damaging to the people involved.  The same is true for rents and interest.