tag:blogger.com,1999:blog-2830084253401570472.post8378108899454098030..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: Reader mailbagEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2830084253401570472.post-9829193712581392622011-03-21T17:16:39.014+13:002011-03-21T17:16:39.014+13:00I would add a few points to what Eric has said.
...I would add a few points to what Eric has said. <br /><br />First, rationing with out a white-market right to trade ration tickets will inevitably create a black market. At a time when people are being called on for self-sacrifice to sustain an important major national initiative (e.g. a war), the sight of open flouting of rules may erode the sense of obligation being relied upon. <br /><br />Second, it is by no means clear that rationing leads to fairer income distribution than prices. A case in point, my working-class grandparents had a hard time during the Great Depression in NZ, and then, as things started to improve in the late '30s, bought a petrol station. At that point, the government imposed rationing for petrol to keep both p and q low, destroying their income. <br /><br />Finally, I think it is usually accepted that the U.S. did better with reasonably expansionary Keyensian macro policy to maximise output, price controls to keep the expansion being eaten by inflation, and moral suasion for high saving to allow consumption to fall to free up resources for military expenditure. There was limited rationing of key militarily important goods, plus other command regulations to prevent consumption of such goods (bans on sightseeing driving, I believe was one). In this case, rationing can be a useful part of the mix, but not for fairness reasons. Rather the reason is that, pure price rations when lots of resources need to be diverted into public expenditure may result in very high tax rates with a resulting inefficiency that has to be traded off against the inefficiency of rationing. WWII, however, is a very unusual one-off event.Seamus Hoganhttps://www.blogger.com/profile/06752338906486087395noreply@blogger.com