On Markets
Author: raj
Category: Economics, Miscellaneous, Uncategorized
Suppressing a market is a bit like squeezing a balloon—the trade will usually pop up somewhere else. The Soviet Union was full of markets. The factory in north Vladivostok would be allocated too much sheet metal but not enough coal. The factory in south Vladivostok had the reverse problem. Both factory managers would ask for extra resources, but in the command-and-control system the incentive was to ask for more of everything, with little hope of success. So, the managers would quietly, and illegally, do a deal with each other. Professional expediters would be sent out to barter for scarce inputs, and the informal market reached a high level of sophistication.
According to the iconoclastic economist Mancur Olson, there were seven levels of Soviet disapproval of these markets, from black through gray to off-white. In China in the early 1980s, the government officially sanctioned this sort of side trade as part of the process of moving from a planned economy to a market one. Nowadays we realize it is insanity to suppress markets for coal and steel, but we are still tempted to try the trick on the markets for sex, drugs, rhino horn, soccer tickets and, apparently, Mars bars.
These efforts usually fail. Tickets for big sporting events such as the World Cup or the Super Bowl are a bit like Soviet coal. They are supplied in a non-market system or sold at below-market value for political or ideological reasons. Although scalpers perform a social service by getting tickets to those who value them most, nobody likes them because they are bearers of bad news: These events are popular, supply is limited, and consequently the price is high. Markets are good at telling us this sort of truth, and the ticket agency Ticketmaster is starting to use online auctions to beat the scalpers at their own game.
Nobody has left a comment!