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The imperfect market for passports

Posted By Russ Roberts On March 23, 2007 @ 2:11 pm In Markets in Everything,Prices | Comments Disabled

Plenty of fodder here [1] (HT: Doug Ransom) for an Econ 101 class discussion or exam. Because of a new requirement that Canadians visiting the US need a passport, there’s been an increase in demand to get a passport and the Canadian bureaucracy hasn’t responded as briskly as they might. The result is excess demand for a passport on short notice and that means price gets paid in other

Pat has a layer of cardboard beneath him, a wool blanket on top of
him, two paperbacks found in a dumpster in his hand and the promise of
$80 when he wakes up.

     “I’m a lucky guy,” the 40-year-old homeless man said, from one of the most coveted spots in town these days.

Pat was first in line at the Fort Street passport office lineup
yesterday. He claimed his spot at 1 p.m. the afternoon before, and
slept out on the sidewalk with about 15 other homeless people who have
put themselves to work holding space in line for those a little more
fortunate.

“I’m taking advantage of an opening in the marketplace,” Pat said.
“Capitalism is what our whole society is based on. It’s the foundation
of what we are and what we’ve become.”

If people don’t want
to wait the hours in line that it’s taking to get passports processed,
Pat and others are willing to sleep on the street — as many of them
would be anyway — and get paid for it.

One of the nice lessons here is that even though the homeless are willing to sleep on the street for nothing, the market is rewarding them. I’ll leave as a homework question (use the comments if you’d like) why the market works this way. Another lesson comes from Pat’s analysis:

"I’m taking advantage of an opening in the marketplace,” Pat said.
“Capitalism is what our whole society is based on…"

The first sentence is true. The second? Let’s just say the decision of how many clerks to put int he passport office isn’t exactly capitalism in action.

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[1] Plenty of fodder here: http://www.canada.com/victoriatimescolonist/news/story.html?id=21891694-1dc8-42a7-b264-534220b4d9c6&k=52232

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