The poster 4 claims that people should not spend more money than top legal on certain goods, that is---- the government sets a price ceiling for every goods in wartime.
The intention of government is good: since people's expectation about future is not optimistic, they think that the prices of goods in the future may be more expensive, so they buy more stuff today, and then inflation may occur. To let everybody get stuff, government thus set a price ceiling, hoping that even poor people can get what they want. But it is against the law of supply and demand and can cause problem.
Since the price is lower than the equilibrium price in the free market, the demand will exceed supply, meaning that there is gonna be a shortage of goods. The reason is simple: people respond to incentives.
For suppliers, the profit is low, and thus they are not willing to produce more; for customers, the price is lower and thus they buy more.
The government's behavior damages price's role as allocation of productions. So now occurs three ways to allocate the products.
The first way is queue, but people's time, energy will be wasted. The trade-off of queue is bigger than price change.
(2)Favored group and coupons. But that's not fair. The cost of discrimination is lower. If you don't have relationship with government, you are hard to get the stuff. Rich people can buy all the coupons and get stuff, which in the end the poor people still cannot get what they want.
(3)Blackmarket. The price in black market is always higher than price in the regular market.
Price ceiling in wartime will be useful in the short run when people are the most patriotic and filled with ideology. But in the long run, it stimulates more disparity.
Comment on poster 1
For me, material conservation is always important, whether in war period or peace era. Material conservation is surely helpful because if we advocate that we should waste resources to stimulate manufacturing growth, that's the application of broken window fallacy: paying attention to superficial and immediate consequences while losing sight of long run loss. We are bound to produce, but it doesn't mean we can turn to use another pencil when we have just used the old one once. The resources are scarce.
Comment on car-sharing club
Well, this is interesting. As far as I know, sharing cars is common in certain countries, of which modern Germany is typical. The good point of sharing cars is that we can buy fewer cars, consume fewer gas resources, emit less toxic gases, suffer fewer traffic jams and thus have a better living standard. But a question is how to ration the cars.
Can we ration cars according to Need? But someone may cheat even if they don't need cars desperately. We can't ration cars by merit, either.
Maybe we can ration by force, but as Rizzo said in class, this way is costly and unpredictable. To win a fight, you will have to go to the gym to exercise, which may waste you time and energy; you have to see doctors more, a waste of money; when you fight, you have to find some one to fight each time you want the car and you may lose the fight.
So at last we use price ration but the question is the final price may be higher than the price you pay to own a car. Besides, some people share a car means that demand exceeds supply. Most of us use cars with similar reasons: go to work, take kids to school, go on a vacation in a holiday, etc. So we may want to use the cars at the same time (at eight we go to work, in Thanksgiving we go out for a holiday), how do you cope with the corollary that at some time no one rent the car while at another specific time all the people want the cars? (We simply don't have enough cars to satisfy every person's various needs.)
Comment on the claim that the world cannot exist half free and half slave.
Do we really have to sacrifice ourselves in order to have freedom?
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