February 12, 2013

How To Create A Shortage - 101

In my last post I mentioned that I was looking for some guest bloggers, including my wife, who has more talent than she gives herself credit for having.  In the comments section, Grant Davies, a terrific blogger and cyber buddy, offered to share some of his postings to help fill the gap until I can find the time to get back to regular posting.  Upon getting back to my blog, I immediately decided to take Grant up on his offer since I know he has some truly great quality posts.

Well, I'm sort of taking him up on his offer.  He deserves whatever modest traffic boost I can provide in exchange for sharing, so I'm going to post a portion of one of his recent posts.  To finish it, you'll need to follow the link back to his blog, "What We Think And Why".  The post, explaining shortages is fundamental economics stuff, and really, common sense, but Grant does a terrific job explaining it.  It's something Americans should understand better than they do, so it's another good reason to share this particular post.  It's also a good reason to read it.

How to Create a Shortage - 101

By Grant Davies

If you want to create a shortage in a hurry, just pass a law to "freeze" the price of the target commodity. In this case, the commodity is food and the place is Argentina. The news came out yesterday in this story.

The economically ignorant people in Argentina are about to get a lesson in "How to create shortages 101." I suggest they get in line at the grocery store now while they can because it will be a while before the alternate retailers of food and other grocery items - also known as the black market - are set up to deliver the needed commodities to the Argentinian populace.

In case anyone needs a refresher course in "unintended (and bad) consequences", I refer them to the long lines at the gas stations that people my age had to endure just a few decades back, 1979 to be exact.

The price of gas was frozen by the economic literates back then and the lines became blocks, sometimes miles, long. Soon there was rationing schemes of every type being tried, and corruption and favoritism became rampant. The same thing happened with the supply of impossible to find "rent controlled" apartments in NY and other goofy places that tried the same nonsense with the housing commodity.

Read the rest here.

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