Nonprice Rationing in One Paragraph

As mentioned in our first paragraph we live in a world of scarcity. When a government tries to prevent monetary prices from doing their job unintended results occur. Nonprice rationing is both more costly and more complex than most people imagined, so why does the government keep trying it? It sounds good to help the poorest in our society, but the answer is not by having rent controls or affordable housing or raising the minimum wage. Let’s look at rent control – a legal limit on rent that landlords may charge for apartments, a limit that does not change over the years but stays static. This has led to increased homelessness in the U.S., led to a rise in descrimination, and has caused the destruction of thousands and thousands of apartment units in major cities in this country. The government might try to enforce the idea of a rent control but the laws of supply and demand win out. Let us say you are living in a rent control apartment building in New York City and it begins to cost the landlord more to maintain that building than what your rent covers. What does the landlord do? He cannot go on losing money and at some point he stops making as many repairs on the apartment. As time goes on and goods and services become more expensive it is even more of a drain on the landlord’s wallet. From the landlord’s perspective you see a losing investment and you try to sell the building. When this does not happen you simply walk away, leaving the building to fall in ruin and the inhabitants to try to find housing elsewhere. This idea can be expanded to the current housing crisis. Banks and mortgage companies, under Congressional laws, lower the standards for who can borrow money – the idea being to allow lower income families to move into homes they have not been able to afford in the past. Congress thought they were doing the right thing and in the process brought down the banking and real estate industries in the country. Nonprice rationing has never worked in a free market society as can also be seen in wage controls. Bump up the minimum wage and an employer will hire fewer people and the people that the employer hires will need better education and skills to match the higher wage. The raise in the minimum wage does just the opposite of what the government intended. So now we have a government that is ignoring the lessons of the past only this time we are not talking about better wages or affordable housing. The government wants to create an affordable health care system.