Thursday, October 21, 2021

Defending Shortages

Arthur Castus: What is his punishment for? Answer me!
Ganis: He defied our master, Marius. Most of the food we grow is sent out by sea to be sold. He asked that we keep a little more for ourselves, that's all. My ass has been snappin' at the grass, I'm so hungry!

--King Arthur

Transportation secretary defends widespread shortages, claiming that they are a product of a strong economy. Textbook central planner rationalization. 

The truth is that prolonged shortages occur only when markets are not permitted to freely function. In unhampered markets, increased demand motivates producers to increase prices. Higher prices signal opportunity to producers, who subsequently increase production rates and, in some cases, add capacity so that higher demand is met with more supply. 

Shortages persist if this process is impaired. If prices are not permitted to rise, or if producers are restrained from increasing supply (through, for example, regulations that slow supply chain activities), then demand continues to outstrip supply and shelves go bare. 

Those who defend shortages are typically the people who create them.

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