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Page 1: Shortage, Shortage, Who's Got the Shortage?

This article was downloaded by: [The University of Manchester Library]On: 09 October 2014, At: 15:17Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK

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Shortage, Shortage, Who's Got theShortage?Robert S. Goldfarb aa George Washington UniversityPublished online: 27 Jun 2013.

To cite this article: Robert S. Goldfarb (2013) Shortage, Shortage, Who's Got the Shortage?, TheJournal of Economic Education, 44:3, 277-297, DOI: 10.1080/00220485.2013.795461

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Page 2: Shortage, Shortage, Who's Got the Shortage?

THE JOURNAL OF ECONOMIC EDUCATION, 44(3), 277–297, 2013Copyright C© Taylor & Francis Group, LLCISSN: 0022-0485 print/2152-4068 onlineDOI: 10.1080/00220485.2013.795461

ECONOMIC INSTRUCTION

Shortage, Shortage, Who’s Got the Shortage?

Robert S. Goldfarb

Shortages, while rare, do appear in the United States. Under what circumstances might this happen?Which alleged shortages are “true” economic shortages? When do true shortages emerge in a marketeconomy? What does this tell us about how market economies work? Six types or categories of “true”economic shortages and one category of alleged shortages are identified in this article. Examplesinclude shortages of Christmas toys, flu vaccines, nurses, concert and sporting event tickets, airlineseats, parking spaces, and blood supply. Do a few fundamental underlying causes link the sixcategories? Questions for class discussion are included throughout.

Keywords blood supply shortages, Christmas toys, demand deadlines, shortages, ticket pricing

JEL codes A10, A22, D00

When teaching principles of microeconomics, a serious conceptual puzzle arises about mar-ket economies. Centrally-planned economies like the former USSR have people in charge ofspecifying what will be produced by whom, while in the U.S. economy, no one is explicitly incharge—it appears to be an undirected chaotic free-for-all. Yet in the USSR there were continuingshortages—“bread lines”—while in the seemingly chaotic U.S. economy, continuing shortagesare a rarity. This lack of shortages puzzle requires an explanation.

This line of argument can lead to other interesting shortage issues. Shortages, while rare, dosometimes appear in the United States. Under what circumstances might this happen? A standardprinciples text presents economic shortages caused by legislated price ceilings. The typicalexample is rent control. However, there are other examples which provide rich material foranalyzing true and perceived shortages. Which alleged shortages are “true” economic shortages?What do such shortages tell us about how market economies work?

Robert S. Goldfarb (e-mail: [email protected]) is a professor of economics emeritus at George Washington University.Discussions with and suggestions from Louis Bruno, Edwin Dean, George Eads, Roger Elson, Daniel Hamermesh,Thomas Leonard, Allen Lerman, Frank Levy, David Lindauer, Mark Long, John Lowe, Larry Promisel, Herman Stekler,and Anthony Yezer have led to improvements in this article. An anonymous referee provided extensive and extremelyhelpful suggestions about style and substance.

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One aim in this article is to enrich course discussions in principles and intermediate micro-economics of shortage mechanisms in markets. When might “true” economic shortages exist?What light can this shed on how markets work? A second aim is to illustrate that some allegedshortages are not true economic shortages. What exactly is meant by a true economic shortage?Is the often alleged nursing shortage a true economic shortage? How about the alleged shortageof “affordable housing” or of Cabbage Patch dolls in 1983? Because some alleged shortages spurcalls for policy interventions, it can be enlightening for students to consider when an allegedshortage is a true economic shortage, where intervention might be considered.

SPECIFYING SEVEN CATEGORIES OF POTENTIAL SHORTAGES

This section presents seven potential shortage categories. The following section discusses eachcategory in detail.

Category 1: A Demand Deadline

“I spent days trying hard to get a Cabbage Patch doll for my daughter for Christmas, but couldnot find one.” “I needed a flu shot, but there were none available.” These are examples of demand“deadlines” that can generate a short-run shortage when combined with higher-than-anticipateddemand and “too slow responding” supply.

Category 2: Dynamic Shortages Due to Lags in Supply or Demand

“Our hospital has heavily advertised openings for nurses, but we have not gotten enough appli-cations!” Real or alleged personnel shortages appear, then often fade away.

Category 3: Market Prices Set by Suppliers below Market-Clearing Levels

Examples include shortages of concert tickets, sports event tickets, graduation tickets, restaurantswith no seats available, elite universities with applicant pools far larger than admission slots, andsome initial public stock offerings (IPOs).

Category 4: Government-Set or Government-Regulated Prices (or QuantityRegulation)

Street parking or parking in transit system parking lots, road congestion, and blood supply areexamples. Rent control provides a typical principles textbook illustration of shortage-inducing,government-regulated prices.

Category 5: Capacity Choice in the Face of “Regular” Variance in Demand

Examples include occasional shortages of seats on plane flights and of hospital emergency roombeds.

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Category 6: Sudden Unexpected Supply Shocks

Gasoline and housing shortages brought on by Hurricane Sandy in 2012 and a 2012 egg shortagein Mexico are examples.

Category 7: (Alleged) Shortages based on “Needs”

Examples include alleged shortages of “affordable housing,” oil, nurses, and teachers and otherpersonnel, accompanied by claims like the following: “There is a lack of affordable housing,”“We need 20 percent more nurses to maintain adequate care,” “We are going to run out of oil.”The nursing case provides an example of shortages that are sometimes true economic shortagesand other times not.

DETAILED DISCUSSION OF SHORTAGE CATEGORIES

Category 1: A Demand Deadline Enables a Short-Run Shortage

Christmas Toy Shortages

A proposition about market economies is that shortages continuing for long periods are rare.Christmas toy shortages are not long-term shortages. They arise in large part because there isa short-run deadline by which the toy demand in question must be satisfied. In a shortage, thedemand turns out to be much higher than the manufacturer anticipated: The toy “wins the market”that year. The winning toy must be given as a Christmas present on or right around Christmas Day.Shortly after Christmas, the former shortage disappears (though it may reappear the followingChristmas).

Some facts about actual Christmas toy shortages. Peter Hartlaub (n.d.) listed 12 Christ-mas hit toys, from the Shirley Temple doll in 1934 to Zhu Zhu Pets in 2009. He identified toys“that peaked in popularity just before the holiday season, experienced shortages around Christmasand . . . fell out of favor after the hype was over.” He described the pandemonium associatedwith Cabbage Patch Kids shortages:

[I]n 1983 . . . Coleco’s Cabbage Patch Kids became a huge media-fueled hit, causing a mad scramblefor the few million . . . dolls that were produced before Christmas. Demand from children who wantedto ‘adopt’ a doll led to adult fistfights and price gouging, with some Cabbage Patch Kids selling onthe black market for 10 times their retail price.

Hartlaub noted similar Christmas scrambles for Transformers in 1984 and Tickle Me Elmo in1996.1

Margaret Pressler (1994, A-1) described the queue facing parents trying to buy Mighty MorphinPower Rangers. The toy, introduced two years previously, “still is in such demand that 16 factoriesworking around the clock can’t keep up. The result is near frenzy at many toy stores.” SomeToysRUs stores had waiting lists requiring four to six months to get to the top.

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Possibilities for class presentation/exercises/discussion of Christmas toyshortages.

(1) The instructor might provide a simple illustration of the problem facing the manufacturer.Propose to the students that when the (monopolist) manufacturer is planning productionruns, (s)he thinks that low and high demand scenarios are equally likely. Linear demandcurves can represent each scenario, the two differing only by the price axis intercept.Assume constant marginal costs of production. Ask the students, “Faced with thesetwo demand possibilities, what demand might the manufacturer reasonably assume forplanning purposes?” A plausible answer would be the average of the two demand curves,a version of “expected demand.” The result for a monopoly supplier is a solution witha price and quantity too high for profit maximization if the low-demand situation isrealized, and price and quantity too low for profit maximization in the high-demandsituation. Barring an equilibrating short-run price rise in the high-demand situation,there will be a Christmas toy shortage under high demand.

(2) The discussion above suggests that toy shortages were not eliminated by short-run priceadjustments. Students might be asked why prices did not rise to eliminate the shortage.Possibilities include (i) sellers afraid of bad publicity; (ii) chains like ToysRUs cannotadjust prices rapidly; (iii) counter to the idea that prices did not rise, there may havebeen selective price raises under the table. A follow-on discussion might introducepost-disaster “price gouging.” People appear to have notions of “fairness” that treatequilibrating price increases for things like ice shortages in the post-disaster period asextremely unfair. See, for example, Munger (2007) and Boggs (2012).2

(3) A skeptical response might be, “I do not agree with your explanation for CabbagePatch doll shortages. The demand might have been reasonably predictable, and therewere likely no supply constraints that made it impossible to stockpile enough dolls tomeet demand. Instead, a producer deliberately generated a shortage—with associatedpublicity—to make the product seem more valuable.” Students might come up with thisor be asked to respond to it. The instructor might ask under what circumstances thisstrategy would increase gross or net revenue.

Flu Vaccine Shortages

The flu vaccination market can produce shortages in some ways similar to those for Christmastoys. Flu vaccine production takes time under current methods in which the vaccine is “grown”in eggs.3 There is uncertainty before the season as to the type of flu likely to emerge. The WorldHealth Organization issues a forecast of probable strains before the season, and manufacturersproduce a vaccine based on that forecast.4

The actual demand for shots will depend on people’s forecasts of the likelihood of a seriousoutbreak. People do not necessarily have accurate perceptions of the probabilities of contractingflu. Moreover, “(p)erceived probabilities significantly affect the subsequent take-up rate of flushots” (Carman and Kooreman 2011, 2).5 Thus, as in the Christmas toy case, demand is uncertain.In the first months of the 2004–5 flu season, demand considerably outpaced supply, leading towidespread complaints of inability to get shots. This was due in part to a supply problem: TheUnited States had only two suppliers of flu vaccine, and one of the two was prevented from

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supplying vaccine just before the season because of reported contamination of vaccine lots.However, without a demand “deadline”—people wanted shots in time to be protected from theexpected threat—there would not have been an initial shortage. Newspaper reports asserted theUnited States had only half the vaccine it needed (see Brown 2004a, A-1). Attempts to remedythis “supply shortage” combined with an unexpectedly mild flu season then turned into an excesssupply situation (Stein 2005, A-1).

Supplier leeriness about overproducing lowers the potential supply of shots. This leeriness isheightened by the fact that the vaccine cannot be held over for next season, because the flu typeexpected then is likely to be different. An interesting report about overproduction driving out fluvaccine producers appeared in news coverage of the 2004 shortage:

Wyeth Pharmaceuticals doesn’t make flu shots anymore . . . For the winter of 2002–03, it made 21million doses . . . and shipped them . . . early in the fall. But . . . a lot fewer people wanted it . . .(T)he next spring, Wyeth threw away 7 million unsold doses, for a loss of $30 million . . . Last AprilWyeth pulled out (Brown 2004a, A-1,12).

Possibilities for class presentation/exercises/discussion about flu vaccine shortages.

(1) Does the small number of flu vaccine producers make this situation different in importantways from the Christmas toy case? Are the expectations problems different?

(2) Developments in production technology may allow producers (allegedly “within the nextdecade”) to free themselves from producing vaccine using fertilized eggs, instead using“various types of cell culture” (Brown 2004a, A-12). To what extent might faster, cheapermeans of production ameliorate the seemingly recurring supply-demand imbalance?

(3) According to Brown (2004b), in Canada, government orders and pays for 90 percentof the influenza vaccine used. How, if at all, might such a scheme ameliorate thesurplus/shortage problem?

Category 2: Dynamic Shortages due to Lags in Supply or Demand

Nursing Shortages

“Claims about nursing shortages . . . go back at least to the 1950s (McKibbin 1990)”(Goldfarb, Goldfarb, and Long 2008, 192). Some would be recognized as true economic shortagesby economists, while other alleged shortages would not. In a true economic shortage, the supplyforthcoming at the prevailing price (a wage in the case of personnel) is inadequate to meetthe demand.6 A many-decades-old story about nursing shortages blames monopsony hospitals.While some analysts think that story may still have some validity, conceptual considerations andempirical evidence argue against it.7

A more compelling story involves demand and supply lags creating “dynamic shortages.”8

Imagine that, initially, quantities supplied and demanded are equated. Then demand rises. Ifwages rise enough, quantity demanded will again equal quantity supplied. But suppose insteadthat the wage responds sluggishly, while demand keeps increasing, “so the wage increases nevereffectively catch up to the demand increases . . . [A] dynamic shortage is like a dog chasing itstail—and perhaps occasionally catching it” (Goldfarb, Goldfarb, and Long 2008, 194).

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Why these lags in wage response? Following McKibbin (1990) and Feldstein (2003), supposethere are periodic outward shifts in the demand for nurses. Then

“because of imperfect ability by both nursing employers and potential nurses to recognize the . . .changing . . . market . . . there are lags in responses from both nursing supply and from hospitalsand other employers . . . [A] ‘lag of several years always exists before the information on nurses’wages is transmitted to high school graduates and nursing school enrollments change’ (Feldstein2003, 267); . . . This interplay between shifts in demand and lagged responses from supply producesrising vacancies, which induce rising wages, in turn resulting in supply responses, and decliningvacancies.” (Goldfarb, Goldfarb, and Long 2008, 194–95)

Claims sometimes appear about other health personnel shortages. Barnow, Trutko, and Piatak(2012) evaluated the possibility of shortages for pharmacists, physical therapists, home healthcare aides, and special education teachers. Doctor shortages are a periodic concern. A recentiteration is reflected in the title of a New York Times article (Lowrey and Pear 2012), “Doctorshortage likely to worsen with health care law.”

Possibilities for class presentation/exercises/discussion about personnelshortages9

(1) Ask students to provide a diagrammatic description illustrating the dynamic shortageprocess. How would supply constraints on nursing school capacity and/or limitations onthe supply of nursing school faculty be illustrated diagrammatically?

(2) Barnow, Trutko, and Piatak (2012) discussed how regulations specifying labor qualityrequirements contribute to shortages of special education teachers. The special needspopulation in schools has grown because of the ability to diagnose conditions, require-ments to “mainstream” special needs children, regulatory limits on class size for specialneeds students, and so forth. Moreover, certification requirements have increased, espe-cially the federal requirement that special education teachers be “highly qualified.” Theycite Cook and Boe’s (2007) distinction between a quantity and a quality shortage. Thosetwo authors “found there was a need to replace 49,000 less than fully certified specialeducation teachers (practicing in 2001–2002) and that the shortfall had been growing. . . since 1993” (Barnow, Trutko, and Piatak 2012, 61). But this distinction “betweenquantity and quality illustrates the difficulties in defining an occupational shortage . . .[T]he vast majority of special education students are taught, even if not by ‘highly qual-ified’ special education teachers. Thus, the market is clearing in the sense that schooldistricts are responding to the lack of ‘highly qualified’ special education teachers andemploying other individuals” (Barnow, Trutko, and Piatak 2012, 61). Students might bepresented with these facts and asked to discuss whether this “quality shortfall” situationrepresents a true economic shortage.

Category 3: Market Prices Set by Suppliers Below Market-Clearing Levels

Ticket Pricing

Tickets for concerts, sports events, and school graduations sometimes seem to be priced belowmarket-clearing levels, resulting in excess demand for tickets (“ticket shortages”). One example

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is Super Bowl XXXV tickets. “[T]he price listed on the tickets—either $325 or $400, dependingon (seat location) . . . was well below the figure that would have balanced demand with the fixedsupply of seats” (Krueger 2001, 23).

Perloff (2007, 270) and Connolly and Krueger (2005, 27) reported that in 2002, Bruce Spring-steen charged $75 for some concerts, well below the price that would have equated demand withsupply. “When the tickets went on sale at the Bradley Center in Milwaukee, . . . virtually allwere gone after 20 minutes. Some tickets were available from scalpers, ticket brokers, and on theInternet at higher prices. One Web site offered tickets for the concert at . . . Dallas for $540 to$1,015” (Perloff 2007, 270). The average price of a resold ticket at a Philadelphia concert was$280. “Mr. Springsteen said he set the price relatively low to give value to his fans” (Perloff 2007,270).10

These under-pricing examples can motivate a discussion as to why entities might be willingto sacrifice substantial revenue, and the consequences of such under-pricing. As noted above,Springsteen says he does this to “give value to his fans.” However, ticket under-pricing resultsin fans being unable to purchase tickets at the stated prices. For example, problems with theTicketmaster Web site allowed scalpers to gobble up the available Springsteen tickets:

“(B)y the time the website was fixed, the tickets were gone. According to . . . Ticketmaster, scalperswith ‘sophisticated’ computer programs are to blame . . . Springsteen tickets were showing up . . .(at) secondary ticketing websites . . . (at) $143 for nosebleed seats to nearly $8,000 for prime spots.”(McCall 2012)

Super Bowl XXXV also illustrated the difficulties in keeping prices at below market-clearinglevels. “A week before the Super Bowl, tickets on Yahoo!Auctions, for example, traded for $1,500to $3,500” (Krueger 2001, 23). Similarly to concert ticket under-pricing, lost revenue results. “Bycharging a market price for tickets—say, an average of $2,300—the NFL could have increasedits revenue by some $150 million” (Krueger 2001, 25).

What might explain this NFL under-pricing? An official, when asked why the NFL does notcharge more, “explained that the league tries to set a ‘fair reasonable price’ . . . to maintain an ‘on-going relationship with fans and business associates”’ preferring to take a “long-term strategicview” rather than increasing “present-day profit” (Krueger 2001, 25). Krueger suggested that“sports teams have an implicit long-term contract with their season ticket-holders. The fans agreeto support the team in lean years, and the team agrees to treat loyal fans fairly” (Krueger 2001,25), so the short-run price is not the relevant price.

A second explanation comes from Gary Becker’s (1991) restaurant pricing model describedbelow.11 Alternatively, issues of rational self-interest and fairness might provide insight into thisunder-pricing behavior. In Krueger’s survey of Super Bowl ticket-holders, 92 percent indicatedthat “it would not be fair to raise the face value to $1,500 if that is still less than the amountmost people are willing to pay for tickets” (Krueger 2001, 26). Krueger documented that recentacademic studies show these fairness attitudes to be widespread.

Restaurant Pricing

The Economist magazine (1992, 67) described Becker’s (1991) restaurant pricing issue asfollows. Why, “while dining out . . . did one restaurant refuse reservations and have a queue . . .

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when a similar one across the street seemed never more than half full?” Why didn’t the crowdedrestaurant charge more, which would lower queues and increase profits? (Becker 1991, 1109).

Becker’s answer is that some goods or activities are preferred precisely because of theirpopularity. “A queue is an indicator of this crowd effect. People want to eat at restaurants thatare ‘in,’ go to the ‘big’ game, see the new block-busting movie” (Economist 1992, 67). Thesupposition is that “the pleasure from a good is greater when many people want to consumeit, perhaps because a person does not wish to be out of step with what is popular or becauseconfidence in . . . quality . . . is greater when a restaurant, book or theater is more popular”(Becker 1991, 1110). This can create an upward-sloping portion of the demand curve facing thesupplying firm, so “there may be pairs of profit-maximising equilibriums for each producer ofcrowd-effect goods: a ‘bad’ equilibrium with unused capacity and a ‘good’ one with queues”(Economist 1992, 67).

IPO Under-Pricing

A longstanding claim is that IPOs of stock shares are frequently under-priced. Academicstudies indicate

“that I.P.O. under-pricing is ubiquitous . . . According to Professor Ritter . . . (o)ver the past 50 yearsI.P.O.’s . . . have been underpriced by 16.8 percent on average. This translates to more than $125billion that companies have left on the table in the last 20 years. I.P.O. (under-pricing) is also aworldwide phenomenon.” (Davidoff 2011)

Under-pricing leads to price increases soon after the initial offering and suggests a shortage ofavailable shares at the initial price, as do hearsay reports of smaller clients of brokerages beingunable to buy any of the IPO shares initially.

Davidoff offered a number of possible explanations: information asymmetry, investment bank-ing conflicts, managerial conflicts, litigiousness and regulation, and behavioral explanations.Some of these—information asymmetry, investment bank conflicts, and managerial conflicts—aredistinctly different from the ticket pricing cases in that players are exhibiting arguably maximiz-ing behavior. The investment banking conflict view, for example, “posits that banks arrange forunder-pricing . . . to benefit themselves and their other clients” (Davidoff 2011).

Possibilities for class presentation/exercises/discussion about ticket and restaurantpricing.

(1) Ask the students how motivations for Super Bowl under-pricing compare to concertunder-pricing. One striking difference is that in the Super Bowl case, the NFL offerswhat sounds like a longer-run profit-maximizing story for short-run under-pricing. Incontrast, there seems to be no analogous monetary return-maximization explanation forunder-pricing concert tickets. The NFL sells season tickets and wants to promote repeatseason buying. Concerts by a specific star or group are occasional and sporadic, socutting prices to long-run maximize is a far less viable strategy. People cannot and donot buy a “multiyear/multi-concert” pass to the next N years of Springsteen concerts.In contrast, a season ticket-holder to the NFL is given the option to subscribe to thefollowing season.

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(2) There are sometimes legal prohibitions against ticket scalping. Students might be asked,(i) under what conditions are such prohibitions likely to be successful, and why; and (ii)from a normative economics point of view, is ticket scalping a bad thing?

(3) The demand curve for “in goods” has been posited to slope downward, then upward,then downward again. One might ask the students to suggest what the demand curvefor crowd effect goods might look like. Or one might draw this demand curve and askstudents whether this captures the Becker (1991) crowding phenomenon and why.

(4) In the 2012 Facebook IPO, shares were seriously over-priced, leading to stockholderlosses and a public relations disaster. Does the possibility of over-pricing, with itsattendant undesirable effects, help explain the prevalence of under-pricing?

Category 4: Prices Set or Regulated by Government (and/or Quantity Regulation)

Standard principles texts use legislated price ceilings (rent control) to illustrate regulatory short-ages. I focus on other less-well-known examples, sometimes involving direct price-setting bygovernment rather than government-imposed price regulation.

Parking and Congestion

Parking space shortages exist in the downtowns in most cities:

“The maddening quest for street parking is not just a tribulation for drivers, but a trial for cities. Asmuch as a third of the traffic in some areas has been attributed to drivers circling as they hunt forspaces. (This) . . . takes a toll in lost time, polluted air, and . . . double-parked cars that clog trafficeven more” (Cooper and McGinty 2012, A-1).

Many people have experienced this frustration of trying to park where there is excess demand.Sometimes the spots are “free” (there is no meter charge for the space). Other times parkingcharges are low enough that quantity demanded exceeds quantity supplied at peak times.

An experiment in San Francisco uses technology to raise parking prices “on the city’s mostcrowded blocks and lowers (them) on its emptiest blocks” (Cooper and McGinty 2012, A-1).12

Prices can be adjusted every month to leave “each block with at least one available spot.” To theextent such experiments lower congestion, they indicate that parking spots in crowded areas areunder-priced.

The parking space shortage need not be downtown. Consider a commuter who parks at a Metrostation in a far Washington, DC suburb. For many years prior to building a new parking facility,the older one filled up by 8 AM. Frustrated potential parkers arriving later would drive up themulti-level facility searching for a space. Failing to find one, they drive out of the facility. Theextra gas expended, the frustration of the unsuccessful drivers, and the time wasted by those whoarrived much earlier than their jobs demanded to ensure obtaining a space, constitute a socialwaste. This is another example of a shortage created by governmental under-pricing. There existssome price for parking in this Metro facility that would have reduced demand to a level roughlyconsistent with the fixed supply of parking spots.

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Traffic Congestion as a Shortage

Can a road very crowded at peak times be viewed as a “shortage of road capacity”? Suchcongestion can be very costly, as it can slow down trips. Leape (2006, 157), for example, notedthat London congestion “measured in . . . delay per mile compared to uncongested conditions,averages 3.7 minutes/mile.” He concludes that “(w)ith more than one million people enteringcentral London between 7:00 and 10:00 a.m. on an average workday, and more than one-quarterof those by road, the cost of congestion was clearly considerable” (Leape 2006, 157).

If traffic congestion is interpreted as a shortage, then it can be seen as government under-pricingof road use. An example consistent with this view, the London Congestion Charge, is analyzed byLeape (2006). Survey evidence from 1999 suggested that a large majority of Londoners viewedtraffic congestion as a major problem. In 2003, this situation provoked a kind of daily congestioncharge “for driving or parking a vehicle on public roads within central London between thehours of 7:00 a.m. and 6:30 p.m. on workdays. Traffic congestion has declined substantially, andthe program is largely popular.” Leape viewed this government pricing of an externality as “inimportant respects, a triumph of economics” (158). Lindsey (2006) noted, however, that as of2006, such charge schemes remained a rarity.

Blood Supply Shortages

Periodic announcements specify geographical areas suffering from dangerously low bloodsupplies for transfusions; sometimes shortages are more widespread. In July 2012, the Red Crossannounced that its blood supply was at its lowest level in 15 years, and that “(i)f things don’t turnaround, doctors may have to cancel elective surgeries” (DiBlasio 2012).

Widespread shortages may be due to special circumstances, such as severe storms which“forced the cancellation of dozens of blood drives” (DiBlasio 2012). Additionally, however,current federal regulations militate against using price incentives to promote blood donationswhen supplies are low. For whole blood donations, U.S. Food and Drug Administration (FDA)regulations allow donors to be paid, but blood from paid donors must be so-labeled. Becausehospitals allegedly refuse to use blood from paid donors due to possible liability issues, theregulatory regime prevents the price system from working.13,14 Moreover, the Red Cross (theprimary blood drive organization) does not pay donors. A well-functioning price system wouldpresumably help eliminate local or more widespread shortages through price increases whenquantity demanded exceeded quantity supplied.

Complicating the shortage problem, some claim that the current lack of price incentivescontributes to regional shortages from mal-distribution of existing stocks of blood:

“[A] pint of blood might cost a hospital $210 in Wisconsin but $265 in New Jersey . . . By confiningpurchases to local operations, some hospitals find themselves with unexpected surpluses while otherhospitals . . . are in dire need . . . (Those) with surpluses often fail to use blood before it expires,contributing to national figures for wasted blood that government data peg at between 5 and 14percent.” (Goodman 2012, 1)15

The quality complication. Concerns about blood supply quality are probably partly respon-sible for the existing regulatory regime. The fear is that contributed blood will be contaminatedwith HIV or hepatitis, allegedly more likely if donors are paid.16 Regardless of the underlying

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reasons for such regulatory restraints on price incentives, the potential exists for national andregional shortages.

Possibilities for class presentation/exercises/discussion about prices directly set orregulated by government.

(1) Parking shortages in San Francisco motivated the use of technology to raise “the priceof parking on the city’s most crowded blocks” (Cooper and McGinty 2012, A-1). Askstudents how they as drivers would view such a scheme. Then ask them what, if anything,their attitudes suggest about the political viability of such schemes. What would they seeas these schemes’ most important advantages and disadvantages for coping with parkingspace shortages?

(2) Consider the following quote about a market in organs: “Proposals to pay for organs . . .have been opposed on the following grounds: One common criticism is that payment is‘immoral’ because it involves ‘commodification’ of body parts . . . But the voluntaryarmy used by the United States and many other countries allows the commodificationof the whole body, since volunteers expose themselves to injury and death (in conflicts). . . It is also claimed that payment for organ donations would encourage impulsiveand reckless provision of organs, because donors would not be able to calculate therisks involved” (Becker and Elias 2007, 21). Students might be asked what they makeof these claims. The instructor might indicate some of Becker and Elias’s reactions tothese claims. They suggest that waiting periods could be required to avoid impulsivedonations. They further argue that “the most effective answer to the critics . . . is thatthe present system imposes an intolerable burden on thousands of very ill individu-als who suffer and sometimes die while waiting years until suitable organs becomeavailable” (22).

Category 5: Capacity Choice in the Face of “Regular” Variance in Demand

Airline Seats and Hospital Beds

Airlines face demand for specific flights that varies daily, often in unpredictable ways. Theairline must choose the optimal volume of seats (plane size) in the face of this daily demanduncertainty. Profit-maximizing behavior is likely to result in too few seats to always meet un-predictable unusually large peaks, but meets expected demand on average. Hospitals face ananalogous problem in that the flow of emergency patients varies daily in unpredictable ways.Because empty bed capacity is very expensive, the hospital may not maintain enough capacity tomeet extreme, periodic peak emergency room demands.

Capacity problems could be rectified by the airline or hospital increasing its capacity. Butthese increases may be severely constrained by external circumstances. Airlines, for example, arefaced with gate and runway restrictions at many airports, limiting their ability to increase flights.However, other markets allow for capacity adjustments more readily, as in the case of parkingshortages described above. That shortage was effectively eliminated by building an additionalparking structure.

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Possibilities for class presentation/exercises/discussion about capacity choice.

(1) What benefit and cost items are required for a conceptually correct benefit-cost study ofraising airport or emergency room capacity?

(2) When confronted with excess demand for emergency room (ICU) space, hospitals some-times place the emergency patients in non-ICU beds. What might be the difficulties versusadvantages of using this mechanism for adjusting to shortages?

(3) How is the capacity choice problem for airlines or hospitals similar to/different from theparking under-pricing problem described above?

Category 6: Sudden Unexpected Supply Shocks

Flu Vaccine Again

The flu vaccine shortages discussed earlier in Category 1 also involved an unexpected supplyshock during the 2004–5 flu season.

Agriculture

Agriculture supply shocks are often associated with inhospitable weather. However, not allshortages are weather-related, as in the case of the egg market in Mexico. Alleged to have “thehighest per capita egg consumption on the planet,” in 2012, Mexico “was faced with an extremeshortage of eggs.” As a result, “(t)here has been hoarding. There have been price spikes andtwo-hour lines to buy eggs. Some retail outlets have been forced to limit how many cartons a daya customer can buy” (Booth 2012, A-9).

An avian flu outbreak among Mexican chickens is partially responsible for the substantialdecrease in egg supply. The June 2012 outbreak led the government to act “with lethal efficiency”and slaughter “11 million chickens to prevent its spread” (Booth 2012, A-9). Another contributingfactor may have been large increases in the price of chicken feed. The overall result was a doublingof egg prices in Mexico.

This led the President of Mexico “to promise to bring egg prices down—and to punishspeculators . . . A program to monitor the sale of eggs has led to investigations of 1,299 retailersfor possible price gouging” (Booth 2012, A-9). Tariffs on egg imports were also suspended.

Hurricane Sandy

Hurricane Sandy in October 2012 created gasoline shortages in New York City and the NewJersey shore:

“In Brooklyn . . . (w)ould-be drivers (searched for) . . . an open gas station. The few stations thatdid have fuel rationed it to two gallons and barred cars . . . requiring motorists to stand in line witha container.” (Morello and Lynch 2012a, A-6)

“New Jersey (imposed) . . . gas rationing . . . and New Yorkers overwhelmed temporary gas stationsset up by the military . . . [V]ehicles backed up a half-mile or longer, filling the ramps leading to

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service areas along the New Jersey Turnpike and the Garden State Expressway” (Morello and Lynch2012b, A-3).

One response in both New Jersey and New York was to impose odd-even gasoline rationingto shorten lines. People with license plates ending in an odd number could purchase gas only onodd-numbered dates, and those with an even number only on even dates.

An interesting side-drama involved allegations of price-gouging, illegal in New York and NewJersey:

“As complaints about post-storm price-gouging . . . pile up, (the) New Jersey Attorney General . . .filed complaints against seven gas stations . . . accusing them of ‘exploiting people’s misery to makea quick profit.’ One . . . station . . . increased its price by more than $2 a gallon . . . after the storm.”(Newman 2012)

Some commentators decried price gouging laws as completely counter-productive. “Exactly howbad does the gasoline shortage . . . have to get before the governments of these two statessuspend their insane price-cap policies?” (Carney 2012). The same storm generated concernsabout a housing shortage.

Possibilities for class presentation/exercises/discussion about unexpected supplyshocks.

(1) Why might price gouging laws be counterproductive for ameliorating shortages? Besure to consider both supply-side and demand-side effects.

(2) Hurricane Sandy also generated concerns about a housing shortage:

“Government leaders are turning their attention to the next crisis: finding houses for potentially tensof thousands of people left homeless. The Federal Emergency Management Agency said it . . . hasalready put 34,000 people in the . . . metropolitan area up in hotels and motels . . . [O]fficialshave yet to lay out a specific comprehensive plan for finding them long-term places to live. Andgiven the scarcity and high cost of housing . . . and the lack of open space . . . can enough vacantapartments be found? Will the task involve huge, Katrina-style encampments of trailer homes? . . .(W)ill authorities put the trailers . . . (i)n stadiums? Parks?” (The Express 2012, 3)

What are the important similarities and differences between this housing shortage problem andthe gasoline shortage problem?

Category 7: Alleged but not True Economic Shortages

The term “shortage” can have many meanings in common parlance. Some situations describedas shortages in public policy discussions are not true economic shortages. These other uses of“shortage” are not necessarily meaningless or otherwise invalid. But the aim in this article isto explore how true economic shortages can arise in market economies. Thus, it is important todistinguish true economic shortages from other alleged shortages not involving a true economicshortage.

A true economic shortage exists when buyers want to purchase a specific amount of a particularproduct and are prepared to pay the prevailing price, but cannot find enough units to purchase.The Cabbage Patch toy shortage at Christmas was a true economic shortage. The potential buyeris “putting her money where her mouth is,” but sufficient quantity supplied is not forthcoming.

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Alleged shortages that are not true economic shortages are often described as “needs”: hospitals“need” more nurses, lower-income people “need” more affordable housing, and the UnitedStates “needs” more scientists. Claims about nursing shortages provide a particularly interestingexample, because there can be true economic shortages of nurses as well as alleged shortages.

Nursing Shortages

A hospital that has budgeted vacancies for registered nurses, but cannot find enough applicantsto hire at the prevailing wage, faces a true economic shortage. Explanations for these true economicshortages were provided earlier in Category 2. However, the nursing shortage literature displaysseveral types of alleged, but not true, economic shortages.

Two nursing shortage categories that are not true economic shortages are “professional stan-dards shortages” and “projected future shortages.” The former “measures the amount by whichactual nurse staffing falls short of some desired level based on preexisting standards of the profes-sion” (Goldfarb, Goldfarb, and Long 2008, 192–93). When queried about the adequacy of theirstaffing, a hospital’s medical staff and/or administrators may respond with the size of nursingstaff needed for an acceptable/desirable level of care. This does not mean that the hospital hasa personnel budget (quantity actually demanded) that allows hiring this size staff. That is, aprofessional standards shortage does not imply a true economic shortage.17

Evidence about links between these two shortage types comes from Grumbach et al. (2001).In their large sample of hospitals, 18 percent of those with a low nursing vacancy rate alsoreported a moderate-to-severe nursing shortage. Of those that had intermediate vacancy rates, 47percent reported a moderate-to-severe nursing shortage. The lack of a high level of vacanciescombined with assertions of moderate-to-severe shortages suggests that these reported shortagesare unlikely to represent true economic shortages.18

A second category of alleged shortages involve “projected future shortages.” These typicallyinvolve hypothesizing a number of changes expected to affect the nursing market and projectinghow these changes would affect that market over a sizable time period. A typical assumptionwould be that the ratio of nurses required per patient would not change. Such projections are at besteducated guesses about the future. Even if accurate, the estimated gaps between estimated futurequantities supplied and demanded do not necessarily imply a future true economic shortagematching the alleged gap. Suppose, for example, the 2013 forecast for 2019 implies a gap(“shortage”) of 300,000 nurses. If hospitals and other employers of nurses do not have budgetedvacancies for 300,000 nurses in 2019, there will not be a true economic shortage of 300,000in that year. However, if there were unfilled vacancies for 20,000 nurses, that would be the trueeconomic shortage. Nothing in these projection/forecasting techniques provides any reliable basisfor what actual budgeted openings for nurses will be in 2019.

Affordable Housing

Measures of “affordable housing” in the United States are typically based on housing cost as apercent of income. The U.S. Department of Housing and Urban Development Web site indicates

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The generally accepted definition of affordability is for a household to spend no more than 30 percentof its annual income on housing . . . An estimated 12 million renter and homeowner households nowpay more than 50 percent of their annual incomes for housing. (USHUD 2012)

So, using this definition, a shortage of affordable housing exists. This affordability definitionof shortage does not imply a true economic shortage; that is, it does not imply that individualsare unable to find units at the going rental prices. Instead, the “shortage of affordable housing”consists of the failure of the market to put forth units at prices low enough that families canalways rent a unit for no more than 30 percent of their annual income.

I noted earlier that alleged shortages are often generated by a concept of “need.” For affordablehousing, low income families “need” to be able to purchase “adequate” housing at no more than30 percent of their income. While this may be a desirable situation to work toward, this allegedshortage—a failure to reach a desired social goal—is not a true economic shortage as definedabove.

Possibilities for class presentation/exercises/discussion about shortages that may notbe true economic shortages.

(1) I noted in Category 2 (Dynamic Shortages) that doctor shortages are a periodic concern,most recently as a projected consequence of health care reform. Lowrey and Pear(2012) noted that “local health experts doubt there will be enough doctors to meet . . .[a particular] area’s needs.” This claim provoked skeptical reactions by two leadingeconomists. Steuerle (2012) argued that “for the first time ever, a dermatologist offeredto have a nurse perform my checkup. In all likelihood, this nurse did as good a job as thedoctor . . . she certainly took more time . . . I’m sure she got paid less.” Steuerle goeson to argue that if a seeming shortage did emerge, it would be in part because of thehealth care industry’s uncompetitiveness, including its restrictions on this kind of supplyresponse to increased demand. Reinhardt (2012) noted that Massachusetts “for decadeshas (had) the second highest doctor-to-population ratio in the nation,” yet there are “direforecasts of a looming shortage in that state . . . (Commentators) note ominously thatRomneyCare has overburdened an already taut health care supply in Massachusetts.”Moreover, “the doctor shortage is said to be most acute in primary care,” yet “society’sresponse to that has been to let the incomes of primary care doctors fall relative tospecialty incomes.” Students might be asked to discuss the following:(a) Do restrictions on substitution (of nurses for doctors, etc.) make the alleged shortage

not a true economic shortage? More generally, if one accepts Steuerle’s claim thatthe medical services industry is relatively uncompetitive, does that necessarily meanthat shortages of service providers are not true economic shortages?

(b) What does the falling wage of primary care physicians relative to specialists suggestabout whether there is a true economic shortage of primary care doctors?

(2) A Washington Post article entitled “Scientists Heeded Call, But Few Can Find Jobs”(Vastag 2012, A-1) reported on someone who had earned a doctorate in neurosciencebut “gave up trying to find a permanent job in her field.” The article then alleged that shehad experienced “an economic reality that . . . is counterintuitive: too many laboratoryscientists for too few jobs.” Moreover, “(t)hat reality runs counter to messages sent by

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President Obama and the National Science Foundation and other influential groups, whoin recent years have called for U.S. universities to churn out more scientists.”(a) One might ask the students how an alleged shortage of scientists that is actually

an apparent surplus could arise. Ask them to use supply-demand diagrams in theirexplanations.

(b) The instructor could raise demand-side factors mentioned by Vastag (2012): a possi-ble decline (or too-slow growth relative to supply) in academic positions in biologyand the life sciences; a decline in research positions in the pharmaceutical industry;and slower growth in the National Institutes of Health (NIH) budget following aperiod of rapid growth.

(c) Ask the students whether the availability of much lower-paid post-doc researchopportunities make this problem better or worse. Paula Stephan, an economistwho studies scientific labor, calls the post-doc system a “‘pyramid scheme’ thatenriches—in prestige, scientific publications, and federal grant dollars—a few seniorscientists at the expense of a large pool of young, cheap ones” (Vastag 2012, A-1).

(3) Consider the following complication about “affordability shortages.” It is necessary todefine some housing quality criteria for meeting the affordability standard. Otherwise,living in a tent, for example, might be counted as having “affordable” housing. Is theresome principle for determining the characteristics of the minimum required housingstandard? Of what minimal housing quality should the affordable housing be?

Underlying Causal Factors across the Six Categories

Is there a smaller list of important underlying causes that might link the six categories of trueeconomic shortages? Discussions with colleagues, and my own attempt to address this issue, havesuggested four possible underlying/unifying factors: (i) forecasting errors; (ii) pricing behaviorthat is not market-clearing; (iii) supply constraints preventing timely supply response; and (iv)other sources of reaction lags.

Forecasting Errors

One interpretation of the Christmas toy shortage is that manufacturers are unable to accuratelyforecast which toy will “win” the market. More broadly, the holiday demand for a particulartoy is uncertain. Flu vaccine shortages can also result in part from inaccurate demand forecasts.The dynamic shortage explanation for nursing shortages involves inability of potential nursingstudents and others to correctly forecast future demand conditions, including wages. Forecasterrors are an inherent feature of the human condition and therefore of markets.

Pricing Behavior that is not Market-Clearing

In some cases, government regulation (organs, blood supply) or direct price-setting by gov-ernment (parking, road access) result in below-market-clearing prices. In other cases, it is privatesector decision-makers setting prices that result in shortages (some concert performers, sports

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events, restaurants, IPOs). The private sector case requires additional explanation, because op-portunities for higher profits are foregone. In contrast to the first category above, this category isnot an inherent feature of markets.

Supply Constraints Mitigating against Timely Supply Response

In many cases cited earlier, a rapid supply response would have eliminated the shortage. AChristmas toy shortage could be eliminated if production could be boosted instantly. Unexpectedlylarge flu vaccine demand cannot be instantly supplied. The Washington Metro station’s newparking facility took time to build. If nursing demand rises precipitously, supply cannot reactinstantly because training takes time and nursing school capacity may be constrained in the shortrun. These examples suggest that forecasting errors and supply constraints interact in specificshortage cases.

Other Sources of Reaction Lags

For many examples identified in this article, a more rapid price response would have eliminatedthe shortage. Why didn’t prices adjust more promptly? Are there some situations in which morerapid price responses would not have eliminated the shortage? Another reaction lag involvesinformation flows. The dynamic shortage explanation for nursing shortages involves lags bypotential nursing students in realizing how nursing wages may be changing. More generally,information lags are a feature of many market situations.

CONCLUSION

The examples in this article suggest that shortages in market economies provide a rich sourcefor classroom discussion. But for what purpose(s) and at what cost? At the simplest level,examples such as Christmas toy shortages or lines to get flu shots or difficulties finding aparking spot or post-hurricane disaster shortages can help engage students by working throughfamiliar real-world examples. At a deeper level, investigating the limits of market capabilitiesand forces that interfere with the working of markets can provide a richer understanding ofmarket mechanics and outcomes. An additional useful lesson can be that everyday uses of theterm “shortage”—sometimes linked to calls for government interventions to “fix” the allegedshortage—are not always true economic shortages.

However, time spent discussing shortages has an opportunity cost in topics foregone. Ifone adds the analysis of shortages as an optional topic, the instructor must decide what otheroptional topic to give up or curtail. An alternative strategy is to incorporate shortage exampleswhile covering other topics. The Christmas toy problem, for example, might be an add-onwhile discussing the time dimension of demand curves. Mexican egg shortages might enliven adiscussion of supply shifts. Super Bowl ticket pricing might be a twist on markets clearing. Bloodsupply might energize a discussion of governmental policies affecting market outcomes, and soforth.

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NOTES

1. Hartlaub (n.d.) cited an interesting device used in 1977 for Star Wars action figures to short-circuit theChristmas deadline: “Since toymaker Kenner (couldn’t) . . . manufacture more than a few coloringbooks and board games after the surprise success of ‘Star Wars,’ (George) Lucas still made millionsselling vouchers for 33/4 inch tall action figures. Bright-eyed children on Christmas morning unwrapped. . . the ‘Early Bird Certificate Package,’ with information about the figures they would receive in afew months, but no actual toy.”

2. Michael Munger (2007), a Duke political science professor, recounted a 1996 situation. Hurricane Franhit parts of North Carolina with 120-mile-per-hour winds. More than one million people were withoutpower in the Raleigh/Durham/Chapel Hill area. “Within hours, food in refrigerators and freezers startedto go bad. Insulin, baby formula and other necessities immediately became susceptible to spoilage inthe 92 + degree heat . . . More than a million people needed ice . . . now.” However, the expectedmarket entrepreneurial response—trucks coming in from surrounding areas with ice (and chain saws,etc.)—did not take place. “North Carolina’s anti-gouging law made it illegal to sell anything useful ata price . . . ‘unreasonably excessive under the circumstances’ . . . widely interpreted to limit priceincreases to 5% or less.” Four young men loaded up surplus ice from an area that had stocked up, but thestorm had missed. They came to Raleigh and sold ice (for which they paid $1.70 a bag) for prices above$8 a bag. “Some customers were angry that the price was so high, but almost no one refused to pay forthe ice.” The police arrested the young men “[P]rospective buyers . . . denied a chance to buy any ice. . . clapped . . . as the vicious ice sellers were . . . arrested.” Munger is “completely stumped by theclapping” (as well as “why people support anti-gouging laws”). Government officials were being sentout to “stop price gouging,” while that same government was begging other governments to send ice.He noted that allowing price gouging would result in supply inflows, lowering the price to somethingpresumably near the pre-disaster equilibrium. David Lindauer brought this example to my attention.See Boggs (2012) for a broad-ranging discussion of price gouging.

3. For decades, “flu vaccine has been made by injecting virus into fertilized chicken eggs . . . Each eggmust be . . . hand injected. Millions (of eggs) are needed” (Brown 2004a, A-1).

4. “(D)ue to the constant genetic change in flu . . . the flu vaccine is reformulated each year . . . TheWorld Health Organization (WHO) closely monitors circulating flu viruses . . . and in early springwrites the annual vaccine recipe . . . to target the most virulent strains . . . and includes two subtypesof flu A . . . and one of flu B virus. Usually two . . . strains in the vaccine are changed each year andthe prescription is identical” across North America (Ward 2010, 7).

5. “We study . . . decisions to . . . accept preventive care . . . such as flu shots . . . by elicitingindividuals’ subjective probabilities of sickness . . . with and without the interventions. Respondentsappear . . . aware of . . . qualitative relationships between risk factors and probabilities . . . (but) havevery poor perceptions of . . . absolute probability levels”(Carman and Kooreman 2011, 2).

6. Barnow, Trutko, and Piatak’s (2012, 3) description of a true economic shortage is consistent with theone used in this article: A “labor shortage is: ‘A sustained market disequilibrium between supply anddemand in which the quantity of workers demanded exceeds the supply . . . willing to work at aparticular wage and working conditions at a particular place and . . . time.’ This definition considers ashortage as a disequilibrium condition where the amount of labor that workers are willing to supply isless than employers are willing to buy at the prevailing wage.”

7. There are both conceptual and empirical arguments against monopsony. Conceptually, many hospitalsare in large metropolitan areas, where the simple monopsony argument seems implausible. Empirically,the monopsony model would predict wages rising with city population and hospital density, becausemonopsony is more likely in smaller cities with fewer hospitals. Hirsch and Schumacher (1995, 2005)showed that this prediction is not borne out in the data.

8. A more complete discussion of nursing shortage explanations and data issues is in Long, Goldfarb, andGoldfarb (2008).

9. Additional questions for this and other categories are in an appendix available from the author.

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10. Perloff (2007, 270) goes on to observe, “Assuming he could have sold all the tickets at $280, he gavealmost $3 million of consumer surplus to his Philadelphia fans—double the ticket revenue for theconcert.”

11. “The same phenomenon is found in the pricing of successful sporting events, such as . . . Super Bowls,. . . the pricing of best-selling books” and successful Broadway plays. (Becker 1991, 1110)

12. The experiment is inspired by the work of the economist Donald Shoup. See his The High Cost of FreeParking (2005).

13. The FDA compliance manual (USFDA 2011) states that in “January 13, 1978 (43 FR 2142) the agencyissued a final rule which required that blood and blood components intended for transfusion include adonor classification statement on the labels to indicate whether the products were collected from paidor volunteer donors . . . at 21 CFR 606.121(c)(5). The regulation defines a ‘paid donor’ as a personwho receives monetary payment for a blood donation . . . (and) defines certain benefits that do notconstitute monetary payment.”

14. Plasma donors can be paid, with no special labeling requirements. This is apparently because plasmais used in manufactured products, where the danger of infection can be minimized by manufacturingprocesses. In a commercial setting, “through a process known as plasmapheresis the plasma is removedand the red cells are reinfused into the donor” (USGAO 1998, 6).

15. Johnson (2009) indicated that according to an FDA official, “of the approximately 572,000 additionalunits collected in response to September 11 . . . approximately 208,000 units, or about one-third,expired and were discarded.” Carlyle (2012) cited a claim that 1.3 million pints spoil each year in theUnited States.

16. Another contributing factor is the belief that a monetary reward system may lower blood supply bydiscouraging altruistic donation (Titmuss 1971).

17. Barnow, Trutko, and Piatak (2012, 6) discussed and rejected an analogous concept, “the ‘social demandmodel’ of occupational shortages.” Such a shortage is present “if the number of workers in an occupationis less than what is considered the socially desirable number.” They reject this because “it does notimply that the labor market is in disequilibrium.”

18. If this vacancy data is presented, it may be necessary to first explain that a positive (but “low”) vacancyrate is likely in a market without true economic shortages. The act of people voluntarily leaving jobs(they move away, change jobs, retire, etc.) creates vacancies that take time to fill. So, a labor market inequilibrium typically has a nonzero “frictional unemployment” vacancy rate.

REFERENCES

Barnow, B., J. Trutko, and J. Piatak. 2012. Occupational labor shortages: Concepts, causes, consequences, and cures.Kalamazoo, MI: Upjohn Institute.

Becker, G. 1991. A note on restaurant pricing and other examples of social influences on price. Journal of PoliticalEconomy 99(5): 1109–16.

Becker, G., and J. Elias. 2007. Introducing incentives in the market for live and cadaveric organ donations. Journal ofEconomic Perspectives 21(3): 3–24.

Boggs, J. 2012. Allowing price gouging is the worst form of policy, except for all those other forms that have been tried.Blog: Economists Do It With Models, November 3.

Booth, W. 2012. A flu that ruined breakfast. The Washington Post, September 4: A-9.Brown, D. 2004a. How U.S. got down to two makers of flu vaccine. The Washington Post, October 17: A-1, 12.———. 2004b. Canada’s vaccine plan may be model for US. The Washington Post, October 25: A-3.Carlyle, E. 2012. The guys who trade your blood for profit. Forbes, July 16 (online).Carman, K., and P. Kooreman, 2011. Flu shots, mammograms, and the perception of probabilities. IZA Discussion Paper

No 5739, May. Bonn, Germany: Institute for the Study of Labor (IZA), Research Paper Series.Carney, J. 2012. How to fix the gas shortage: Let′em gouge. CNBC NetNet, November 2. http://www.cnbc.com/id/

49622942 (accessed November 18, 2012).

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Connolly, M., and A. Krueger. 2005. Rockonomics: The economics of popular music. NBER Working Paper No. 11282,April. Cambridge, MA: National Bureau of Economic Research.

Cook, L., and E. Boe. 2007. National trends in the sources of supply of teachers in special and general education. TeacherEducation and Special Education 30(4): 217–32.

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