Here is an excerpt:
There isn’t enough gas. By a lot. A terrible shortage. (Largely caused by the anti-gouging law, but put that aside for now).
That shortage must be solved by rationing access somehow. The only ways to solve it are some combination of (1) price-rationing and (2) non-price-rationing. (Okay, perhaps that was obvious, but I’m trying to be clear, here).
Now. Non-price rationing typically involves queuing. Waiting on line. Standing around, wasting time. First come, first served. That is a COST. How long will the line be? That depends how high the price is. For very high prices, lines will be minimal, because access to the scarce resource is rationed by price. For zero prices, lines will be very long, because access to the scarce resource is being rationed solely by lining up.
This is why resources in the former Soviet Union, and in Cuba and North Korea today, are rationed by standing in line. The rule is that prices are grossly low, compared to the actual value of the resource, so lining up is the only way to ration access.
If I understand his argument later in the post (which I probably don’t), if we lean more towards price-rationing than non-price rationing, the economy – and thus the people in that economy – do better on net because they waste less time standing around in line and more resources go into getting more gas to more people.
Time has value to people, and wasting time in line has a cost. Trouble is, all the money saved on lower priced fuel won’t get you back those wasted hours. But, if you pay a little more for your fuel, you really can earn yourself some extra time do other things besides stand in line.
Read the entire post here.