Well Put My Friend

Here I am on a Saturday, living the dream, making my way through Armen Alchian and William Allen's textbook, Exchange & ProductionIt is filled with gems that I've seen posted ever since Alchian's passing two weeks ago. One stuck out particularly at me, from page 32 of  my 1983 edition-

"Asking people to restrict consumption more than they are induced to do by the market price is to ask them to reduce their gasoline use so that other people can use the gasoline in lower-valued uses. Such required "conservation" compels diversion to less valuable uses; it is wasteful. It also gives some politicians more power over economizing resources and people." (emphasis in original)

I would love if someone can explain a flaw in the argument (besides restricting everyone's consumption through coercion). I cannot find one.  Anyone interested in more about Alchian should check out the links below or this interview.

4 thoughts on “Well Put My Friend

  1. My concern with the quote is that it does implicit value comparison across people. This is something I'm still grappling with - the usual description of the price mechanism talks about resources being allocated to their "most valued" uses. But how can this be claimed without interpersonal utility comparisons?

    • Yes it can be a problem.

      I read him as using willingness to pay as a definition of value, instead of claiming "willingness to pay" means "more utility." I don't think he is saying that those who are willing to pay more necessarily receive more enjoyment in some universal meaning.

      It is important to keep them separate. Sometimes people say most valuable meaning most utility. It can be confusing.

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