Prices are often treated as simple numbers, figures that can be raised, lowered, frozen, or adjusted as policy requires.  This view mistakes the appearance of prices for their function.  A price isn’t merely a number attached to a good or service.  It’s a compressed signal containing information about scarcity, production conditions, preferences, opportunity costs, and countless localized decisions made by individuals who never meet and never coordinate directly.

When a price moves, something real has usually changed beneath the surface.  Resources may have become harder to obtain.  Demand may have shifted.  Production may have become more costly or less efficient.  Prices don’t create these realities.  They reflect them.  Attempts to control prices don’t correct economic conditions.  They silence the signals that allow individuals to respond to those conditions in the first place.

This signaling function is what makes large-scale coordination possible.  Producers don’t need to understand the full structure of global demand, and consumers don’t need to know the conditions of every supply chain.  They only need to observe prices.  Rising prices signal relative scarcity and encourage conservation or expanded production.  Falling prices signal relative abundance and encourage resources to shift elsewhere.  The system adjusts not because anyone designed the process, but because individuals respond to signals that summarize realities they could never fully observe.

Monetary expansion introduces a more subtle distortion.  When the supply of money increases, prices can rise even while the real cost of producing goods is falling.  Improvements in productivity, logistics, and technology may be making goods easier and cheaper to produce, yet nominal prices still move upward because each unit of currency represents a smaller claim on real goods.  The visible price suggests scarcity is increasing even when real abundance is growing, making the signal harder to interpret.

This creates the appearance of growth without necessarily creating more wealth.  Revenues rise, spending increases, and economic activity appears larger, yet part of that expansion reflects the currency measuring economic activity losing precision rather than an increase in real production.  Real prices, measured in terms of resources and production efficiency, may be falling even while money prices rise.  The growth is artificial, reflecting monetary destruction rather than an expansion of real wealth.

When prices are treated as numbers to manage rather than signals to interpret, coordination weakens.  Individuals and firms begin making decisions based on distorted information, resources move less reliably toward their most valued uses, and economic adjustment becomes slower and more erratic.  Prices are not statistics to be engineered.  They are the informational system that allows millions of independent decisions to align without central direction.

Reference

Murray Rothbard; Man, Economy, and State