Why does government prefer rationing?

It’s a straightforward observation: when government is presented with a problem, there is a strong tendency to use some form of rationing as a major part of the solution. We see this in health care, water supplies, electricity, and many other aspects of government regulated or government-run operations. It’s is a reasonable to unexpected emergencies, like World War II shortages or hurricane interruptions, But it is an unreasonable response to chronic problems. So why is it the preferred tool? I think it is because it does not require long term planning, it enhances government authority, and it perpetuates an illusion of fairness.

It should not take too many examples to establish the existence of the rationing preference. My state of California has chronic problems with water shortages. There are a number of ways to increase the supply of water. New dams could be built in the mountains to hold spring runoff for the dry summers, and the Pacific Ocean has the potential for desalinated water. In recent years those solutions have been consistently rejected in favor of water rationing. The price charged for water escalates rapidly to discourage use, but an official promised that people would not be allowed to “buy their way out” of rationing. The government will put flow restriction devices on customers who do not obey dictates.

California took the same approach to electricity shortages, with a system of brown outs to ration supplies. Shortage were easily foreseeable.

Government health care systems around the world depend uniformly on rationing to limit demand. The most popular method is to build long queues for treatment. That discourages people from seeking care, gets rid of some that die while waiting, let’s people live in pain as an alternative to providing service, or encourages them to seek care outside of the government system.

The proposed cap-and-trade system is a mechanism for rationing energy. There is fairly uniform opinion of experts that a straight tax on energy would do a much better job of reducing consumption, assuming one really wants to do that, but a tax is rejected in favor of rationing.

In each case, there is an option to provide all of what is needed on a scale of increased cost. The free market does this naturally. It is only when government intervenes that it doesn’t happen. For example, people who can afford it could sign up for desalinated water to keep their gardens alive in droughts. This could be privately financed so it would cost the taxpayers nothing. It would have the general benefit of increasing the demand for desalinization technology, which ultimately drives the cost of technology down.

In the case of cap-and-trade, the reason for a rationing system is rather transparently related to a quest for government power. Government gets to decide who will get the coupons and at what price. This has the general feature of supporting the theory that government makes better decisions than the free market, so those who have faith in government get to propagate their faith. In particular, it allows politicians to reward their friends and punish their enemies. The coupons will go to buying off key votes to get the legislation passed, to damaging business in states that don’t come along peacefully, and rewarding influential donors who will benefit from the market for rationing coupons.

Politicians are elected for short terms, so the pressure is for them to make a quick fix rather than a long term solution. Environmentalists oppose dams and desalinization, preferring instead a quasi-religious austerity to please the gods of nature. Any politician who goes for a practical long term solution will face the ire of this new brand of fundamentalism. Most voters would probably prefer water to the moral purity of drought asceticism, but so long as water generally comes out of the tap, they are unwilling to ponder the long consequences of avoiding new supplies. In the short term, the politician gains the fanatical support of eco-fundamentalists and loses little general support.

Ignoring the long term is likely to lead to crisis, and politicians may suffer from that. California electricity shortages brought on by the political logic of rationing was eventually swamped by the reaction of the general voters, so a little something was done to eliminate brownouts in the short term. It has to get to the point where the peasants are lighting their torches and marching towards the castle where government lives.

When government manages to stamp out all alternatives to the government system, people tend to be more accepting of rationing as a necessary part of life. They think it is the way things have to be, rather than a consequence of particular policies. The logic is that droughts are a result of the forces of nature, not a consequence of government failing to keep supplies at a pace with population. Similarly, long queues in a health care system are accepted as a natural consequence of working system, not an unnatural consequence of a failed system.

Rationing also perpetuates an illusion of fairness. We don’t want the rich getting more water or better health care, do we? The answer is that in fact we should want the rich to get the better things, so long as they pay for it voluntarily. We should want it as a simple matter of free choice, a fundamental right to spend money as one wishes. However, the invisible hand works to the general advantage as well. The rich get to pay a premium price for the latest technology, be it laser eye surgery or water desalinization or whatever, with the result that it drives the cost of that technology down for everyday use. If in some cases it does not, then we benefit from discovering that fact without a government funded research project.

Politicians are largely not sophisticated enough to recognize the benefits of free markets, or if they do recognize it they find it easier to sell government-imposed fairness to the voters.

Understanding the reasons behind government rationing brings the realization that is not an accidental outcome. It is inherent in government control of markets.

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