Rationing III: The Harm of Conflating Price Distribution with Rationing

This is the third of a four-part series on rationing.
Rationing I: Price Distribution Is Not Rationing
Rationing II: The Definition and Application of Rationing
Rationing III: The Harm of Conflating Price Distribution with Rationing
Rationing IV: Politically-Controlled Insurance and Rationing

Whether price distribution counts as a type of rationing is not merely some semantic dispute. Conflating price distribution with political rationing obliterates the crucial distinctions between the two. A system of property rights and voluntary association is nothing like a system of political control of goods and services.

Price distribution on a free market rests on the right of producers to their property. If you produce something, using your own resources and in voluntary interaction with others, you have the right to exchange your product with others as you see fit. Generally on a free market people exchange goods and services using money as the intermediary, according to the principles of supply and demand.

Political rationing means that some governmental agency assumes command of some set of goods or services, in violation of the producer’s rights to the product and of the consumer’s rights to offer a voluntarily exchange. Rationing entails collectivism in ownership.

In her 1946 letter (see pages 320 to 327 of Letters of Ayn Rand), Rand writes, “Rationing IS coercion, that is, orders, and nothing else whatever. The essential distinction of a free market, as against any other kind of system, lies in the absence of coercion and in the method of exchange by voluntary choice” (page 322).

She continues:

If we accept the idea that a free pricing system is a form of rationing, the unavoidable logical implications and consequences are as follows: if a free pricing system is a form of rationing, then every person living under it has an equal claim upon and title to all the goods produced. (To ration means to share; a free pricing system is not based on the idea of sharing anything; a rationing system is.) But anyone can see that under a free pricing system everybody is not getting an equal share of everything. Therefore, this form of rationing is not working well or fairly. Why isn’t it? Because the rationing is done by private persons in their own selfish interests. What is the solution? Another form of rationing — which would be run by disinterested public servants for the common good of all.

Once the people’s mind has reached this state of confusion, the rest is easy. The collectivists have won, because their basic premise has been accepted. …

And here is the payoff: when the groundwork is ready, a collectivist says to the average American: “Don’t fool yourself, brother. You’ve always lived under a system of rationing and always will. The only choice you have is this: Do you want to be rationed by selfish, greedy capitalists for their own private profit — or would you rather be rationed by a public authority who will have no motive except your own good and the general welfare?” (page 323)

Either people have the right to control their produce and to make voluntary exchanges with others, or their property is collectively owned and rationed by politicians. That is the basic choice.

What is amazing is that 63 years ago Ayn Rand anticipated the precise nature of today’s debate over rationing.

Read Rationing IV: Politically-Controlled Insurance and Rationing