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Distribution Effects of Queues

Smart Choices

This really is just a piece of random economic musing.

In a shortage, rationing is adopted sometimes and queues result when it is not possible (socially or legally) to raise the price of the goods in question. This means that price is used as a resource allocation mechanism up to a certain point ('zero' if the resource is given out, the price ceiling if it is subjected to a price control) and after that, the rationing distributes goods not based on people's 'ability to pay' but on people's 'ability to wait'.

This could mean that goods wind up in the hands of those who exhibit the lowest productivity in the economy (because the opportunity cost of their time is just too low) though in reality, this is usually not the case (even highly productive people who need the good would have to queue). Isn't it strange that the distribution of goods should end up resulting in severe loss of productivity and therefore forgone output? The question, simply put, is who do you want the goods to end up with. This is not so much an obsession with efficiency as a questioning of the effectiveness of a means of distribution.