Can the price mechanism fix everything?

On the Why Curve podcast last week, Phil (and Roger Hearing) spoke to Daniel Gros, Director of the Centre for European Policy Studies, who argued that the gas crisis in Europe will be largely resolved by the pricing mechanism. High gas prices from Russia are making LNG imports feasible, because Europe will pay more than Asia for supplies. It won’t completely bridge the shortfall, he says, but if Europeans make a 15 percent cut in usage, then there will be no need to negotiate with Putin. This week on the Debunking Economics podcast Steve Keen argues that the pricing mechanism ignores the needs of the poor and has, for decades, favoured the rich. The fact that governments need to subsidise low-income households against rising fuel prices, whilst energy companies report record profits, demonstrates just how broken the pricing mechanism is.

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