How do you allocate scarce goods to people?
- Need --> determining need is extremely costly
- Queue --> the length of the line can signal the price, and sometimes makes the price higher because of opportunity costs
- Lottery --> lotteries are very easy to rig
- Equal Shares --> essentially communism; it's difficult to cut up goods & value decreases in distribution
- Might makes right --> planning is difficult and inefficient
- Merit --> who decides merit? No one has the capacity to do so, and you don't necessarily want them to. Rewarding merit isn't efficient.
Evaluation of Rationing Mechanisms
- Where does competition come from?
- Competition derives from scarcity.
- What is the nature of competition--destructive or constructive?
- The price system is constructive; rational criteria above are destructive.
- The world is richer when you allow for constructive competition.
- What are incentives for producers to make/deliver more?
- Other considerations?
- You're assuming the goods exist.
- We tend to reward dishonesty in today's society (i.e. making yourself look poorer to be more eligible for college scholarships)
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