Friday, May 16, 2008

Food: Shortages and rationing - Reality and fact

There has been a lot of talk about food prices and shortages in the media lately.

Wanting to throw some gas on the fire, Saturday's Bulls and Bears program on Fox was worth a viewing this past weekend. The subject of food prices, rice in particular came up. Prof. Marc Lamont Hill of Temple University suggested that rationing was the inevitable and best solution in the near future. His "rationale": Rationing would ensure that people of limited income would get "their fair share".

Let's go over a few terms here about supply, demand and the current situation:
- Shortage - nothing is available in the stores. There is rice available in every store I have been to, so no shortage. Yes, some of the size options are not always available in every store. However, I can get 1,2,5 and 10 lb. bags of rice at every grocery I have been to.

- Prices - Yes, rice has gone up in price as has other foods. The price has gone up because the cost of obtaining rice and other foods has gone up. And the price has gone up because there is a greater demand both real (Asian countries with larger appetites and worse harvests) and manufactured (media frenzy over food shortages).

- Rationing - taking any supply, large or small, and limiting the amount any one person can purchase based upon an allotment system. What always accompanies rationing? Black markets ("Psst! Need some rice? I got 100 lbs in the back of this truck. How you need, bub?"). Also, rationing only encourages store owners and producers to hold some of their supply back for their own backdoor sales. Why not?

(Which also brings up the inevitable idea of "price controls" whereby the government decides the "fair" price for goods and services. The government, which generally hates the idea of supply and demand because it makes their entitlement voting base unhappy, thinks that prices can be set and legally everyone will play nice. Reality has a different set of rules, as it often does when the government is involved. Ask Zimbabwe).

- "fair share" - There is no such thing as fair share. What is fair to you, may not be fair to me. What the good professor meant above was that people of alleged limited means would be allotted a portion of a product which is not in short supply and be able to obtain it without having to work or for a price determined by a bureaucrat trying to buy his vote.

So let's recap here:

- There are no shortages in the U.S. There may be some future date, but not today.

- Rationing sounds good on paper but never works in real life.

- Nobody gets a fair share.

Happy shopping.

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