Rationing 11/16

• Need for rationing arises when you have too few goods for too many people
• Examples of rationing mechanisms
• Need
• Queues
• Lottery system
• Equal shares
• "Kickin' Ass!"
• Merit -> "beauty", "smarts"?
• etc...
• How much other people are willing to pay impacts price
• Not taking higher offer is a real opportunity cost for the business, which raises prices
• Lower supply = Higher Prices; scarcity increases
• Businesses respond rationally to demand and expected willingness of consumers to pay
• If one tries the "need" metric, which is hard to define in itself, Rizzo claims that neither the neediest nor the people who want the good the most will receive it
• This is why you need prices
• Lottery system may be "fair", but it does not guarantee that the neediest or those who value the good the most and can use it best will get the good
• Inefficient in outcome
• May be rigged
• Equal shares mechanism dilutes value to the point of worthlessness
• Some goods can't divide well
• "Kickin' Ass!" is destructive competition and does not allow for planning
• We compete because of scarcity, not "capitalism"
• Capitalism doesn't create competition, it deals with it; competition is inevitable