Sunday, November 04, 2012

Sometimes You Hurt The Ones You Love

I really like the crew at Sadly, No!; they're included on the shortlist of what passes for a blogroll in these parts. But they also exhibit, from time to time, some of the worst traits of knee-jerk progressivism. Which is why it pains me a little to have to do this:

Shorter Tintin, Sadly Not Well Thought Out:
Yglesiatlas Shrugged

  • The gasoline fairy will bring gasoline to all the virtuous people who have nothing more pressing to do than stand in line for hours on end.

Point the first: Contra Tintin, it is not the case that "[w]aiting in line is something everyone can do no matter how much they have in their bank account". There's a positive correlation between wealth and free time, which makes ability to stand in line a weak proxy for wealth. More importantly, however, a person who's stuck in a cold house caring for kids and/or sick relations may have more genuine need1 than a person who lacks such obligations, but only the latter will be able to obtain gasoline. There's no reason to think that willingness/ability to wait in line is a reasonable proxy for need and thus no reason to maintain that allocation of gasoline via queuing is more just than allocation via price.

Point the second: What happens when the local gasoline supply runs out? The queuing method doesn't provide a signal to the wider market that supply should be shifted to address demand; no one is keeping track of queue length or queue time, much less broadcasting that information in an efficient fashion. Allowing people to raise prices, on the other hand, provides an immediate market signal that will cause a shift in gasoline supply from areas of low demand to areas of high demand by virtue of the fact that the suppliers will make more money delivering to the high-demand areas2. History and theory both prove that price ceilings lead to shortages which, in turn, lead to other things like black markets and crime.

In closing:

  • Substituting "free time" for "money" doesn't guarantee a more just outcome.
  • Market-based pricing mechanisms have lots of beneficial properties which queue-based mechanisms lack.
  • Theory and history give good cause to think that price ceilings are counterproductive.
  • For the love of god stop and think for 30 seconds before opening your mouth.

1 However you choose to define it. The fact that it's hard (or impossible, depending on how pessimistic you are) to do so objectively is part of the problem, but I'm not going to get into that here.
2 Recognizing that there are complications here because gasoline delivery may be controlled by long-term contracts rather than spot prices. But this observation is absolutely true for other commodities like ice and bottled water which are delivered almost exclusively on the basis of short-term pricing.

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