Of the numerous and occasionally contradictory techniques used to ration demand and supply [when monetary prices are not used], perhaps the most common is past behavior: persons already in apartments are given preference under rent control, or past acreage determines current allotments under agricultural price support programs. Another common technique is queuing or first come – first served: taxicabs, theater tickets, medical services, and many other goods and services are rationed in this way when their prices are controlled. Of course, discrimination and nepotism are also widely used; the best way to get a rent-controlled apartment is to have a (friendly) relative own a controlled building. Other criteria are productivity – the least productive workers are made unemployed by minimum wage laws;…. collateral – borrowers with little collateral cannot receive legal loans when effective ceilings are placed on interest rates.
Each rationing technique benefits certain groups at the expense of other groups relative to their situation in a free market. Price controls are almost always rationalized, at least in part, as a desire to help the poor, yet it is remarkable how frequently they harm the poor.
Gary Becker, Economic Theory, 1971.
August 21, 2016
QotD: Price controls and other forms of rationing
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