3 ms·

Sorry, but you're not using a correct technical definition of shortage, and also (I would argue) not a useful colloquial definition. If cotton is in high demand

Sorry, but you're not using a correct technical definition of shortage, and also (I would argue) not a useful colloquial definition. If cotton is in high demand and therefore the price rises, that does not represent a shortage of cotton. In neoclassical economics, in a free market where price is fully representative of supply and demand, there is no such thing as a shortage. If there is more demand, the price goes up, if there's less demand, the price goes down. As the price goes up, fewer people are willing to buy, and so you eventually get an equilibrium. On the other hand, if an external (non free market) force sets the price, then you will have a shortage. Say, for example, that a bushel of wheat in the Roman Empire would go for 10 dinars in a free market. If Octavian passes a law that says that wheat must cost 8 dinars, the result will be a shortage. Now you have way more people willing to pay for the 8 dinar wheat than would be willing to pay for the 10 dinar wheat, and that discrepancy (the difference in available goods) is the shortage. Price setting (like rent control in NYC) is a common cause of shortage, but there are lots of other causes. Often companies won't jack up prices because gouging has negative externalities (people start to hate you), and this unwillingness technically creates a shortage. In a shortage, you'll see behaviors emerge like queuing (like in the Soviet Union for sneakers) and also the emergence of a black market where goods are sold at the higher price (often with an additional premium attached).

losteric 9y ago
You are saying shortages do not exist in a perfect market. I agree with that, no persuasion required. However, I am saying that shortages exist because our market is imperfect. Given the axioms of a perfect market, ours is absurdly inefficient: * Homogeneous supply of products: No. there are huge disparities in skill and personalities. Evaluating quality is very challenging. * Perfect Information: No(ish). glassdoor/blind are improving transparency but pricing / performance information is still suppressed. * Low barriers of entry: No. People cannot enter this market without large personal investments (which many lack). * Minimal externalities: No, all of my posts here were focused on externalities... especially ones that raise the barrier of entry. * Zero transaction costs: No, it's expensive to change jobs and businesses expend lots of money searching for quality candidates. * Rational profit-motivated sellers: No, candidates do not seek to maximize profit. Less profitable offers are accepted based on location, ethics, social status, peer network, business domain, tools, or even just not caring to negotiate. * Rational buyers: ehhh ... employers have rational intent, but do make unprofitable decisions due to low and inconsistent quality (less of a concern for those that pay the highest rates). As I described earlier, these imperfections harm related systems and markets. My suggested path back to an ideal market was public education and infrastructure investments.

losteric 9y ago

You are saying shortages do not exist in a perfect market. I agree with that, no persuasion required. However, I am saying that shortages exist because our market is imperfect. Given the axioms of a perfect market, ours is absurdly inefficient: * Homogeneous supply of products: No. there are huge disparities in skill and personalities. Evaluating quality is very challenging. * Perfect Information: No(ish). glassdoor/blind are improving transparency but pricing / performance information is still suppressed. * Low barriers of entry: No. People cannot enter this market without large personal investments (which many lack). * Minimal externalities: No, all of my posts here were focused on externalities... especially ones that raise the barrier of entry. * Zero transaction costs: No, it's expensive to change jobs and businesses expend lots of money searching for quality candidates. * Rational profit-motivated sellers: No, candidates do not seek to maximize profit. Less profitable offers are accepted based on location, ethics, social status, peer network, business domain, tools, or even just not caring to negotiate. * Rational buyers: ehhh ... employers have rational intent, but do make unprofitable decisions due to low and inconsistent quality (less of a concern for those that pay the highest rates). As I described earlier, these imperfections harm related systems and markets. My suggested path back to an ideal market was public education and infrastructure investments.