What are the advantages of using prices to ration goods?
The way we choose to ration goods defines how we compete for the good. The way you ration goods has long-term implications. Much of our economic activity happens over time. When consumers have no financial incentives to deliver more of a product, no one would innovate or create new products. When you ration by lottery, you let people decide for themselves what they want and when they want it. Can you actually allocate goods by people who need it most?? No, examples of how this doesn't work are financial aid and healthcare. The beauty of markets is there's no false choice, no "honor" standard. No one has a powerful enough persuasion to change incentives of individuals. Think of water shortages, water bans, and "water police". When water supply is reduced and the price of water goes up, because of this you will only use so much water, and you are forced to make a value-cost trade-off. The price system regulates our use. If you price water and it rises it provides short-term and long-term incentives. You ration by choice and create more abundance through incentives.
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