Do we ration through governmental directives? That is stultifying repression. Do we ration through market processes? That is efficient freedom.

Posted: March 9th, 2022

There are a couple of discussion questions that I would like each of you to respond to, where there may not be clearly correct or incorrect answers.
Marxists and poets speak of “needs.” But, in economics, “need” is a non-word. Economics can say much which is useful about desires, preferences, and demands. But “need” presumably is a moral, psychological, or physical imperative which brooks no compromise or adjustment–or analysis. If we “need” something, we must have it: There is literally no alternative of either substitution or abstinence.
But the assertion of absolute economic “need”–in contrast to desire, preference, and demand–is nonsense. What do we do if I “need” a certain amount of something and you also “need” a particular minimum amount and both our “needs” cannot be satisfied? It actually is the condition of this world of scarcity that we have conflicting claims which must be somehow resolved. It does no good for each of us stubbornly to stamp a foot, spit downwind, and proclaim inalienable “needs” which in the aggregate cannot be fully satisfied. Scarcity, by its nature, gives rise to competition, to conflict, to the necessity of rationing in some manner the things we desire.
Do we ration goods among competing claimants through fighting and force? That is suicidal anarchy. Do we ration through governmental directives? That is stultifying repression. Do we ration through market processes? That is efficient freedom.
But the message of efficient freedom is unattractive for some. If one advocates allocation through a market procedure which makes relative preferences manifest and effective, there will be a clergyman who will ask, “where in your analysis is the variable representing gentle compassion,” and there will be a journalist who will protest that you lack humane values.
If distribution by central authority for the purpose of better satisfying “needs” were desirable in the case of medical care or concert tickets, it is difficult to see why the same system should not be used in distributing the entire social output, regardless of differing productivities of workers and differing preferences of consumers. Few of our self-styled benefactors go that far (Nor did the Russians ever go that far in practice). While they enthusiastically champion it case-by-case, even the naive and the vicious recognize it in the aggregate as in some sense ridiculous–both unfeasible and unappealing.
Obviously, the world is complicated and frustrating. To make do well, we must analyze cogently and act effectively on the basis of the analysis. We must have intellectual guidance–an analytical orientation, a set of criteria and techniques of deduction and of testing, in short, a theory. Otherwise, everything is a special case, and we are directed by whim and instinct and emotion, not by coherent principle. And the conflicts of competition, stemming inevitably from our condition of scarcity, are resolved by decrees from a ruling bureaucracy, not through individual marketplace bidding on the basis of personal preferences.
Questions for Thought and Discussion:
Why is talking in terms of needs not useful in analyzing people’s behavior? Why does marginal analysis require analytical terms such as preferences and demands rather than “needs”?
If I argue that the government should provide me with something because I “need” it, is that analytically any different from saying “I want it, but I don’t want to pay for it”?
If I shouldn’t be forced to pay for something I “need,” who should have to pay for it?
In areas of greatest need–in the sense of being the most difficult to do without, such as basic food, clothing and shelter–does it become more or less important to allocate resources by a process that most effectively communicates people’s desires to producers? Does your answer imply such goods should be allocated by the market system or through government?

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