May 15 – Rationing, Central Planning

On May 15, 1942, seventeen states introduced gasoline rationing to support the war effort. A prominent economist, Professor Peter Boettke, from George Mason University, attributes his decision to become an economist to his experience digging swimming pools one summer, while still in school. His employer required a lot of fuel, and due to gasoline shortages caused by the oil embargo of 1973, the crews were filling up tanks and then transferring the fuel to the machines by hand. Doing so required siphoning, and it was his task to suck the fuel into the hose, to get the siphon started. He developed a strong distaste for shortages and any form of rationing, and became an economist to figure out how all that worked!

War consumes a lot of resources. During World War II, fulfilling the armament requires necessary to win the war meant shifting lots of production away from ordinary, civilian uses, to military uses. Car factories became Jeep and tank factories. And all those jeeps and tanks needed a lot of fuel, creating shortages. As a way of fairly addressing those shortages, the government took over the allocation of fuel (and many other things). Each family received an allotment of coupons each month, which they could use to legally purchase things the military also needed.

Rationing is an example of central planning. A Rationing Board would meet and decide the proper allotment of goods each person could have that month. If their calculations were off, it took time for that information to get back to them, and often, by the time it did, the conditions had changed. During war, there may be no alternative, but countries without functioning markets also often have one form of rationing or another even in peacetime. Communist countries, for instance, limited supplies of consumer goods, and rationing occurred through a culture of long lines. People would often queue up, not knowing what goods awaited them at the counter, figuring that they would have plenty of time to figure it out before they got to the front of the line.

Many young people in the United States had never experienced rationing of any sort…until recently. With the onset of COVID-19 store shelves quickly were emptied of things such as toilet paper, cleaning supplies, canned goods, milk and meat. Prices were unchanged with the increase in demand, causing people to buy more than they needed due to panic. In order to keep up with raising demand for such items, instead of raising prices, stores rationed by limiting the amount of certain products consumers could purchase.

Questions:

  1. Many people in the video are waiting (wasting gas) in long lines for gas, only to be denied. How would you feel if you had a hard time buying things you were financially able to purchase, but unable to obtain?
  2. Have you ever experienced the stores with empty shelves? Or was there an item you or your family needed that was not available? How did that make you feel?
  3. Whenever there is rationing, black markets or high priced resale markets emerge. Why do you think that is?
Image Citation:

10, May 2018, War Propaganda Poster (Office of Price Administration, 1943) . Retrieved from <google.com>.