When there is a shortage of shovels, we should employ rationing, which is a valid alternative to price gouging that many people seem to forget about. Yes, maybe one family would like to buy 20 shovels if they are $10 each. Tough. They get one, just like every other family. This especially applies if it is a short-term shortage which the market wouldn’t be able to re-equilibrate before the shortage was solved another way (by the storm going away and the roads getting fixed).
Unless absolutely ludicrous prices are charged for the shovels, the utility for each family having one snow shovel is much greater than the utility for half the families having no shovels and the other half having two.
The major shortage we have in many cities today is housing. Some cities pass laws saying nobody may charge more than $XXX/month in rent, and that doesn’t work. But smarter cities pass laws saying nobody may raise rent more than $XX/month/year, nobody may evict a tenant just to get higher rent, and for new buildings people can charge as much rent as they like. Then there is no supply disincentive!
When there is a shortage of shovels, we should employ rationing, which is a valid alternative to price gouging that many people seem to forget about. Yes, maybe one family would like to buy 20 shovels if they are $10 each. Tough. They get one, just like every other family. This especially applies if it is a short-term shortage which the market wouldn’t be able to re-equilibrate before the shortage was solved another way (by the storm going away and the roads getting fixed).
Unless absolutely ludicrous prices are charged for the shovels, the utility for each family having one snow shovel is much greater than the utility for half the families having no shovels and the other half having two.
The major shortage we have in many cities today is housing. Some cities pass laws saying nobody may charge more than $XXX/month in rent, and that doesn’t work. But smarter cities pass laws saying nobody may raise rent more than $XX/month/year, nobody may evict a tenant just to get higher rent, and for new buildings people can charge as much rent as they like. Then there is no supply disincentive!