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… is from page 126 of the 2007 Definitive Edition (Bruce Caldwell, ed.) of F.A. Hayek’s classic 1944 volume, The Road to Serfdom [2]; astute readers will understand its relevance to yesterday’s post on the relative merits of queuing versus prices [3] in determining which consumers actually get available supplies of scarce goods and services:
So long as we can freely dispose over our income and all our possessions, economic loss will always deprive us only of what we regard as the least important of the desires we are able to satisfy. A “merely” economic loss is thus one whose effect we can still make fall on our less important needs.
….
If we make the following unrealistic assumptions, queuing alone will allocate goods and services that are in short supply because of price ceilings: (1) political, business, and personal connections will play no role in allocating these goods and services; and (2) there are no black- or gray-market monetary deals to lubricate such allocations – including no monetary deals by which aspiring buyer A pays person B to queue on A‘s behalf – then people who wish to acquire goods and services that are in short supply must spend a specific resource – namely, time – in order to have a chance at acquiring such goods and services. Even a poor manual laborer, whose hourly wage rate is far less than that of any hedge-fund manager, is unable to choose to transform his or her work effort into income and then to spend that income buying the short-supply goods and services.
People such as Michael Sandel simply assume, without warrant, that the amount of time that a poor person must spend queuing to acquire a good in short supply is less than the amount of time that that person would have to work in order to earn the additional income required to buy the good or service at its uncapped price. More generally, Sandel & Co. unjustifiably assume that the value to a poor person of the time he or she must spend queuing is less than is the value to that poor person of spending his or her time otherwise, including on earning income or on taking care of family matters.
With queuing, a poor manual laborer, no less than a rich hedge-fund manager, must – in order to gain a chance of acquiring goods and services in short supply – take time away from what he or she does at a comparative advantage (say, cleaning hotel rooms) in order to spend that time waiting in line. While a more-rigorous analysis of this issue would involve assumptions about other relevant considerations (e.g., income effects versus substitution effects; flexibility of work schedules, etc.), it’s not at all clear that the relatively poor hotel-maid will be made generally better off, compared to the hedge-fund manager, by price ceilings that elevate queuing into the chief means of allocating goods and services.