The Perils of Free Coffee
freakonomics.blogs.nytimes.com
freakonomics.blogs.nytimes.com
There was no FOOD!! that was the problem. You either bought the bread, or went to bed starving. It was a period of transition (about few months) that no matter how much money you had, food was hard to find.
The rationing was a result of scarcity. If priced the food such that there were no lines, only the rich would afford it, and the rest would just starve.
Well, guess what? Those starving people eventually would have had it enough, and throw your goverment out sooner than later. By rationing during hard times, everybody was guaranteed some kind of minimum level of nutrition, and avoided some people hoarding food, while others went to bed hungry.
Queuing doesn't solve the problem; it just means that the people at the front of the line survive instead of the rich. (Of course, the rich tend to be so well-connected that they can just bribe the officials for food.)
When food is scarce, the equilibrium price rises. If the government imposes a price ceiling, one effect is queueing. Another effect is a catastrophic undermining of incentives. If food is expensive, sellers will transport it even at great cost in order to reap the profits. The result is that supplies will rise over time, alleviating the shortage and lowering the price. A price ceiling undermines this incentive, guaranteeing that the 'shortage' will persist.
Rationing is intuitively appealing, but it doesn't work. The surest way to avoid starvation in times of great shortage is to let the price system do its work. Conveniently, that's also the right answer when there are no shortages. 'Do nothing' is often politically untenable, though, and as a result harmful market interventions lamentably persist.
The usual reason for a shortage of food was rampant lying at all levels of the government about how much food was produced in the country. Due to high levels of exports (based on the fictional supply) there was little food to serve the population. Letting the price fluctuate with the market would do nothing unless food could be imported, but imports were also highly regulated at the national level (and the currency had no official exchange rate). I'm speaking here of Romania under communism.
Maybe too general of a statement to draw any definitive conclusions; it's really interesting how the cost of transport is a major underlying factor which is often overlooked, especially for food. However, the economic realities surrounding food are very different from those surrounding coffee.
Rather an issue of supply and demand, the demand for food seems to be becoming more of a distribution issue than a supply issue. Doesn't the US have more obese people than just about everywhere else? And even without modern technology and "globalization", demand for food (or coffee, for that matter) could easily be a distribution issue at the local level, evidenced by the OP. The opposite of globalization is localization.
The parent RE: "The Perils of Free Coffee" . . . for coffee (the only US state that grows coffee is Hawaii, afaik, which is quite interesting considering how much of the stuff Americans drink), the transport/distribution issues would indeed be pretty relevant. But again, at the expense of what? Starbucks' promotional hype for the hope of getting more people in general hooked on coffee being > the minor irritation of its self-proclaimed loyal customers?
From the OP: "Here I was, a loyal customer willing to pay good money for a product similar to the one they’re handing out for free, and they didn’t want my business." And then: "As it happened, there was a Dunkin’ Donuts nearby, but since I dislike DD coffee, I made my walk with no coffee whatsoever."
Just maybe had its intended effect.
The supply and demand argument isn't tenable in areas with both inelastic supply and demand. The possible solutions all involve tradeoffs, and there are good and bad ways to implement them. The good news is that rationing doesn't necessarily require price controls, and there are effective and ineffective ways of sending price signals and otherwise encouraging/discouraging production.
My personal preference is subsidization for the poor - an approach which prices scarcity by trading cash for convenience. Telling the starving that a big of hunger is good for them in the long-run is silly. A bit like arguing the Great Depression was nothing more than a purge of rottenness from the system. When all the banks have collapsed we'll all be better off!