OT
If the prices are higher you have an incentive to produce more, even if it means you have to work harder or longer, or face higher costs.
Also you may not be the only supplier, and probably are not the only potential supplier. The fact that higher prices prevail for bread will encourage people in other areas that don't face shortage to bring bread to you area.
If rather than bread, your talking generators, or something else which you can't easily produce more of, than there is even more reason to raise the price. If you don't raise the price, and there is a limited local supply, than that supply might be used up really quickly by anyone who is lucky enough to get to the front of the line (or has political connections, personal connections, or luck or ability related to whichever way the good is rationed rather than price). If its "first come first serve", and you are lucky enough to be near the front of the line, and you have a moderate actual use, or even just some small potential need for the product, you'll probably get it, if the price is only the normal pre-shortage price. If you don't the other people in line will, and in short order there won't be any more generators. People who really need them badly won't be able to find them so easily.
If instead you let the price move upwards than people who don't really need them badly won't buy, and people 1000 miles away will have an incentive to truck them in.
When the people 1000 miles away truck in the generators to sell they benefit both themselves and the people buying the generators. They make more of a profit than they would selling them halfway across the country, while the people buying them pay high prices for something the need badly, or even they don't need it really badly they could not buy. Whatever choice they pick the point is they have the choice. With the price controlled they don't have that choice, they can only "choose" to not buy the item.
----
More at
econlib.org
cafehayek.typepad.com
liberalorder.typepad.com
Message 23198133 |
