Tuesday, August 7, 2012

Shortage Of Sand

"If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand."

Milton Friedman (1912 - 2006)

In honor of "Uncle Miltie's" 100th birthday, we salute him by using one of his most sarcastic quotes!

But, what do YOU think?  Is it true?

Is there much "taken over" by the bureaucrats that is not later unrecognizable?

Would not the Sahara Desert "taken over" by the bureaucrats not later be unrecognizable?

What causes shortages?  It is simple supply and demand.

When demand exceeds supply there are shortages.  Certainly.  So how do we get there?


Easy peasy.  Does gubment do that?

Take an easy example (and there are many to choose from!) - rent control.

Note:  for the word rent, we could easily substitute other words - price, licensing, inventory, production, subsidy, you name it.  We could also substitute goods or services - corn production, oil production, drug approval and/or distribution, mortgages, auto production, student loans, a whole host of other things influenced, and, soon to come, health care!

So, back to rent control.  To help the "needy," rents are artificially capped with artificial ceilings with pricing that is artificially low that are passed with artificial loopholes from a renter to a friend with artificial "needs" making such units artificially popular, but necessarily artificially few.

Why are fewer available?  Because their owners cannot, or do not want to, rent them at such artificially-low prices.  And they sit, UNRENTED.  Or the owners live in them.

What does this crop of artificially low-priced, and therefore fallow, units do to the rest of the market?  Fewer units available on the market boosts the price of the rest of the market!  Artificially.

Where the market would comfortably find and rest on a proper distribution of supply and demand (i.e. numbers of units available at market prices), instead we have market skews in every regard! 

Add to that apartments that are being purchased by the super rich for sport, trophies, dorms for college kids and so forth, and, well, you have further skews!


Meanwhile, the "average person" has a hard time finding a place to live that is affordable or large enough to house more than a family of guinea pigs.

Such fun and games foisted upon the Sahara Desert would likely, in Dr. Friedman's view, skew its resources beyond belief and create a shortage of sand!

We salute Milton Friedman for his forthrightness, common sense, and ability to speak clearly and forcefully as a true TEACHER in free market economics!  FREE ENTERPRISE!

Thank goodness there is a healthy supply of students of his, free-market economists, coming along now!

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