I probably read this while link hopping from Tyler Cowen’s blog but I can no longer find a source. It was something like:
Money is one of many systems for allocating resources. Others include queuing and violence.
This idea has really stuck with me and changed how I think about things like toll roads, housing costs, and disaster response. It has also impacted how I think about the idea of fairness. Money is very fair if everyone has the same amount to spend, but if someone has much more, then their least important wants can trample over the severe needs of those who have less. Meanwhile both queuing and lotteries put everyone on equal footing, but then fail at fairness because there is no outbidding mechanism to signal greater need.
I think we build resource allocation systems to mirror our own sense of fairness. And when trying to acquire a resource, we prefer whatever mix gives us the best chance of winning. The popular restaurant is a great example to think on.
- Long lines
- High prices
- A reservations system that runs a lottery
- A nepotistic reservations system
What’s the best mix to allocate a table? Depends who you ask and what they have to trade.