Principles of Consumer Rationing

Abstract

In a market economy where consumers are free to spend what money they have on consumers' goods in whatever way they see fit, the function of rationing is performed by price movements. If the supply of any one commodity becomes short relative to the quantity that consumers would collectively wish to buy at the current price, there will be a price increase to prevent consumers, as it were, from buying more than there is. The main reason why this arrangement, in spite of its obvious social blindness, has been thought tolerable in peacetime is that price movements are indispensable for the maintenance of a production system based on private enterprise. And private enterprise has, in spite of certain monopolistic tendencies, seldom allowed increases in relative price to go very far, or to last very long, without responding with larger output. In wartime, the operation of the market mechanism as just described is hampered by shortages in resources available for the making of goods for civilian consumption. Adjustments in the rates of output of different industries are restrained, if not completely ruled out, by scarcity of materials, manpower, and plant capacity. Movements in relative prices may therefore have little effect upon supply. On the other hand, it is clear that the economic burden of the war largely consists in the curtailment of civilian consumption during the war, and can be shifted only to a limited extent into the future. Consequently, the methods by which the limited amount of consumables available is allotted to consumers will really decide how the major part of the economic burden of the war is distributed among the people. Although price movements would do the job, they would do it badly. For these reasons, among others, there is a general agreement that the price mechanism should not be allowed to function freely during wartime. The prevention both of particular price increases-especially for necessities, such as might easily develop for a number of reasons-and of a general rise in prices (inflation) therefore becomes a major objective of the Government's domestic wartime policies. Consumer rationing by administrative action is one of several tools designed to achieve this purpose. Its implications and effects must therefore be seen against the background of these two objectives.