Gasoline Shortages

Paper Summary:

This paper introduces, summarizes and analyzes Armen Alchian's article on what we should do during gasoline shortages. The paper explains that the premise of Alchian's article is that rationing and governmental control of gasoline are not successful solutions. Rather, the paper explains, Archian argues that rationing and governmental control are counter-productive and that free market economics are all that is needed to regulate the price of gasoline in the best way. The paper goes on to further delineate Alchian's position on what should be done during gasoline shortages and concludes that the arguments Alchian presents in his article are based on logic, theory and solid economic reasoning.

From the Paper:

"Both regulatory effects of the free market economy upon the price of fuel would be undermined by the imposition of rationing and price controls. First, in a system of rationing where the selling of part of the ration is prohibited and where everyone receives a set, equal amount of fuel, "needs [of the various people in a society] remain unequal" (Alchian 1). There will be some people for whom the full amount of rationed fuel is more than they need, and there will be people whose supply is not nearly adequate to their needs. The system is, therefore, ineffectual for both types of people, those who do not need the full ration and those who need more than the full ration. The second supposition of Alchian's regarding the regulation of gasoline prices in a free economy would also be rendered ineffectual by rationing. Namely, the fact that there is compensation in the free market economy for those people willing to give up their share of fuel. If a strict system of rationing were imposed which did not allow for the transfer or sale of rations, then people without need of their full ration of fuel could not derive benefit from that fact. In a free market, however, they could sell fuel they did not need."

More papers on Gasoline Shortages:

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• Analytical Essay # 140095 : "Why Are Gasoline Prices Rising?"
• Essay # 40855 : "The OPEC Crisis"

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