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"the concept of a "shortage" of something in a free market is not a coherent one" This is obviously wrong.
by jshen 12y ago
"the concept of a "shortage" of something in a free market is not a coherent one"
This is obviously wrong.
- defen 12y agoCan you give me an example of a legitimate shortage then, as defined in purely economic terms?
- analog31 12y agoThe typical Econ 101 view of supply and demand is a static model. It neglects time. Surpluses and shortages should be possible in any but the most trivial of dynamic systems. I'm not an economist, but I imagine an analogy to models of feedback systems that exhibit unstable behavior. Only the most simplistic systems can be made unconditionally stable.
- defen 12y agoSure, but in the US economy you can always get more "worker utils" by just paying more money. If you can't do that or you don't want to, then it's tautologically not worth it to you, so why do you want to hire them in the first place?
- analog31 12y agoTrue, but it might be worthwhile to engage in lobbying that gives you quicker access to cheaper supply.
- philwelch 12y agoThink of a world in which there are only 500 computer programmers and how much poorer that world would be compared to our own. I think the US economy would be healthier with many more computer programmers, so in that respect I'd say there's a shortage.
- jshen 12y agoA shortage occurs whenever quantity demanded is greater than quantity supply at the market price. More people are willing and able to buy the good at the current price than what is currently available. When a shortage exists, the market is in disequilibrium. Over time, the good will be replenished and the shortage condition resolved.
- defen 12y ago> More people are willing and able to buy the good at the current price than what is currently available. When a shortage exists, the market is in disequilibrium. My argument was that in this situation the price should rise, reducing demand.
- jshen 12y agoSure, but that doesn't happen instantaneously, which is what allows for a shortage. I've seen no good data on this issue either way, but from my anecdotal experience, salaries have been rising for a while now.
- millstone 12y agoI'll try. A shortage is when supply is sufficiently low and inelastic that consumers cannot satisfy an (appropriately defined) base level of consumption. For example, in 2008, the supply of food dropped in Haiti. Prices rose to clear the market, but there was literally not enough food for survival. Many people ate dirt instead, what might callously be called a "substitute good" in purely economic terms. Of course this was a very serious and tragic food shortage. What would a labor shortage look like? Specialized labor has an inelastic supply: you can only train workers so fast. In 2011, Georgia passed an anti-immigration law, and saw a huge drop in skilled agricultural workers that they could not hire enough. When $140 million worth of crops are left to rot in the fields, you've got a labor shortage. I'd call it a serious shortage if, say, there were not enough IT workers to maintain the Internet. We're nowhere near that point.