Rationing Continued 11/18

Two Major Things to Consider

1. How will rationing determine competition?
• Constructive?
• Destructive?
2. Long-term consequences of rationing?
• How does rationing alter incentives?

• "Need" system incentivizes need, not production
• People can cheat "need" system by hiding income, assets, etc...
• Will moral people claim "need"?
• Price system allows for Consumer Choice
• Other systems claim to be better for poor but are often worse
• Needs no policing, since consumers determine distribution and price organically
• Other policing systems often fail and are cheated because there are no true incentives, only negative threats
• If a shortage is threatening, people's consumption will increase to prepare
• worsens shortage by immediately decreasing supply
• EXPECTATIONS
• Price system raises price in a shortage, decreasing consumption and forcing efficiency
• Forces Cost-Benefit analysis
• Consumers have to find out best way to use good
• Automatically makes consumer consider value of water to others, conveying needs honestly and organically
• Allows mobilization of goods to areas that need it
• Saying "You Must" does not work nearly as effectively
• Markets allow for long-term planning, an advantage no other system has