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Article

Abstract

Demand for a new definition and function of pricing more compatible with changing community goals has increased during the past few years. The ongoing battle between the developed and the developing countries about reconstructing a pattern of world trade for a more equitable distribution of values challenges traditional pricing theory. That theory appears to be increasingly inadequate as an instrument of contemporary policy, fostering a system which makes the rich richer and the poor poorer. The new demands require a more comprehensive conception of the function of pricing and a reevaluation of the factors to be taken into account in price determination. Pricing cannot remain as an isolated economic theory, considered relevant only to a few problems, with objectives separated from the larger general community policies. Pricing theory should be compatible with, and where possible contribute to and support, all recommended general community policies as an aspect of overall fiscal policy. It should be made to perform a much broader and more constructive role in protecting common interests. To this end, we define pricing as a process of decision precipitating multiple value effects throughout all the communities affected. It is a process for allocating the benefits and costs arising from use and enjoyment of resources and for effecting a more general distribution of values. The newer demands require that pricing perform the function, not merely of allocating the benefits and costs arising from the immediate exploitation of particular resources, but also of securing a preferred distribution of values not necessarily arising from the resources carrying a particular "price-tag."

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