Wednesday, September 08, 2010
It is indeed a problem. Just to add to the linked post a bit, in normal situations increased demand for shovels would lead to new entrants into the shovel manufacturing and distributing businesses, causing there to be more shovels available for all. But in snow storm crisis, there isn't actually going to be time for new shovels to appear in the marketplace. Instead, shovel sellers will simply make more money, and rich people will be more likely than poor people to obtain needed shovels, even though poor people might not just shovel their own driveways but also might get a bit entrepreneurial and sell their driveway shoveling services to their neighbors. As James says, the point isn't that there's necessarily a perfect rationing mechanism, just that in this case there's no particular reason to think that price is the best one. Under certain conditions, price is a good rationing mechanism, but not all.
by Atrios at 14:05