Sunday, May 02, 2004

Visual Economics -War

A typical war-time economic mentality. Sometimes economic systems like this prevails during peaceful times as recent examples show us (hint: milk, drugs, Cuba).

It is of course unwise to disconnect all sense of price and therefore make it difficult or impossible for people to decide what to produce to satisfy demand. How can one know if there is more shortage of beef or butter if everyting is rationed and no price increases that can direct production in the right direction (towards the customers needs).

There is nothing unique in consumtion of goods in times of war. If the state has to produce weapons and divert useful human and material resources to satisfy the need of the 'Victory', then there is less produced of essential and non-essential goods for the people of the nation. What changes, if the age-old useful concept of money is reduced to a shadow of itself by taking up a system of rationing and price controls?

Of course the beurocrats do not take into account corruption and the human nature of people to do what is best for them in any given situation. If you have something in a rationed economy, do you just take what you are rationed or do you go to the black market. History has the answer in this instance and I rest my case for now.

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