If a quarantine produces significant shortages of goods for an extended period, then we may need rationing policies. Hopefully not, but we should at least be thinking ahead just in case.
Here's a thread on what rationing is and how it works. 1/n
Here's a thread on what rationing is and how it works. 1/n
Rationing is when the gov declares rules about who can purchase how much of what goods. Eg. "each household can buy 2 bottles of hand sanitizer per week." The vast majority of the time this isn't necessary, but when there's not enough to go around we need to decide who gets it 2/
Why would we ration and not just let buyers/sellers decide? Because during shortages, the markets will distribute inequitably: all the goods will go to buyers who show up first, or have the most time to wait, or can afford to pay somebody to wait, or to "preferred customers." 3/
That tends to mean that the rich get all the goods while the poor get nothing. Rationing preempts that inequity. Rationing also reduces the incentive to hoard goods, because there's a bit more certainty about your future access. 4/
When should we ration?
When there's an essential good, that is in short supply, and is expected to be for a long time.
So, not if we expect the shortage to be over next week, and not for luxury goods (unless that luxury good is made of scarce essential goods). 5/
When there's an essential good, that is in short supply, and is expected to be for a long time.
So, not if we expect the shortage to be over next week, and not for luxury goods (unless that luxury good is made of scarce essential goods). 5/
How do we do it? The fastest/simplest way is through announcement: gov declares the rule, and then relies on stores and customers to self-police.
This may work for a short time - most people will cooperate, and cheaters will be shamed into line. But it won't work for long. 6/
This may work for a short time - most people will cooperate, and cheaters will be shamed into line. But it won't work for long. 6/
The longer an unenforced rule lasts, the more people will cheat. And as "honest" people hear about the cheaters benefiting from cheating, they'll stop being honest. This would undermine badly-needed social trust.
The in-person solution would be to post observers in stores 7/
The in-person solution would be to post observers in stores 7/
with the authority to fine people for disobeying, but a) that would tend to just push cheaters to do business in the streets instead of the stores, and b) in a quarantine people probably aren't going to be shopping in stores much anyway. 8/
If there's more time to actually design a system, then in the old days this would be done by coupons. Consumers would be given a certain amount of ration coupons to use in stores alongside cash.
In a quarantine in the internet age, we'd be talking about altering online 9/
In a quarantine in the internet age, we'd be talking about altering online 9/
shopping platforms to accept digital ration credit.
Consumers would only be allowed to buy a rationed product if they have both the cash and the ration credit. The gov would distribute ration credit to consumers, and then collect it back from manufacturers. 10/
Consumers would only be allowed to buy a rationed product if they have both the cash and the ration credit. The gov would distribute ration credit to consumers, and then collect it back from manufacturers. 10/
Manufacturers would be required to show that they received proper rations for everything they produced and sold, or else they'd be fined, as would people caught selling/buying the particular good without rations. 11/
There's a lot of ways to screw this up:
- Enforcement is difficult, so this depends on the utmost voluntary cooperation from the public.
- Formal rationing basically does not work without price controls (I'll do a thread on price controls probably tomorrow)
12/
- Enforcement is difficult, so this depends on the utmost voluntary cooperation from the public.
- Formal rationing basically does not work without price controls (I'll do a thread on price controls probably tomorrow)
12/
- The right amount of ration credit needs to be distributed: too little means goods sit un-purchased on shelves, while too much means not everybody will get their purchase fulfilled, so some buyers unexpectedly won't get what they need. That can cause "ration inflation," 13/
which threatens the whole system.
I know this sounds scary. Again, I don't want this to happen. Hopefully this whole virus thing blows over in a few weeks, or no shortages develop. But if not and if we had to implement a rationing system, it would not be because we enjoy it, 14/
I know this sounds scary. Again, I don't want this to happen. Hopefully this whole virus thing blows over in a few weeks, or no shortages develop. But if not and if we had to implement a rationing system, it would not be because we enjoy it, 14/
or because we wanted to trample on people's liberties. It would be because the alternative would be much worse: stockouts, inflation, the rich stockpiling while the poor are deprived - and all the resentment and social upheaval that would cause.
We don't want that world. /Fin
We don't want that world. /Fin
PS. here's an example of the warning signs. washingtonpost.com/business/2020/… Producers fearing coming labor shortages should ramp up production right now to full-tilt to build up as much inventory as we can.
Here is a thread on price control:
