this post was submitted on 29 Sep 2023
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The formal definition of shortage is: A situation where an external mechanism, such as government intervention, prevents price from rising.
In other words, doing this this would create a shortage – of the real kind, not the pretend "Wah, I can't find anyone to work for me because I won't pay enough. There must be a shortage of workers!!" kind that we have to listen to in the news these days.
Of course, the US didn't miss the obvious fact that price controls would create a shortage. It managed the shortage with rationing. Are we prepared to do that?
That's a bizzare-o libertarian definition of "shortage."
Most people would say that there's a shortage if there's an insufficient supply to meet the needs of society. If there's a shortage of food but there's no lines at the grocery store because an apple costs $1 million, and so poor people starve at home because they can't afford the food anyway, libertarians would say that there's no shortage because the market has found the market clearing price. People who aren't ideological nutjobs would say there is a shortage because people are staving.
That is the colloquial use, but it cannot be resolved into anything meaningful. The "needs of society" is completely arbitrary. In fact, the tone of what people think a society needs expands as the supply expands. There is really no end to what a society can come to "need". You can say there is a shortage of everything by that definition, which makes it a completely useless term.
Which is why the formal definition differs. It actually draws a clear distinction between what is and isn't a shortage. It can be used to communicate ideas. Your definition, being unresolvable, cannot. Obviously it gets thrown into conversation that way, but only as a shock word to conjure up emotions in the audience, not to tell something to the listener.
People starve everyday. I've never heard anyone say that we have a shortage (by your definition) of food. How could they? They say 50% of food is wasted, which would imply that we actually have a massive surplus of food.
I think a lot of the opposition to your 'formal definition' of a shortage would disappear if you gave examples of credible institutions using that definition.
Also I don't think it's true that there were price caps put on toilet paper by the government everywhere there was a TP shortage.
I would propose that a shortage is when inventory is depleted or prices rise such that buyers seek sources previously considered outside the market.
The shortage ends when the novel sources are no longer sought. (Either because novel sources have been normalized and inventory/ prices restored to equilibrium, or traditional sources manage to restore equilibrium making the previouslt novel sources irrelevant).
Note that in my definition it's only a shortage if it's inability to buy [or perception/concern therof] that's motivating the search for novel sources.
Craigslist was considered outside the TP market before the pandemic, and is again considered outside the TP market. During March 2020, it was very much in the market. The shortage had nothing to do with price caps and everything to do with supply chains being unable to handle spikes in demand.
A food shortage is when food inventory in a market is diminished or prices increased to the point that people seek novel sources. Like if people are eating mud in order to not feel hungry, that's a food shortage.
Wikipedia does indeed refer to a shortage the way he described it. The very next paragraph gave the colloquial definition, which you've described. Your response is the direct result of his decision to be obtuse. Don't feed the trolls.
Ah yes, I've been trolled. He is conveniently omitting the part of the definition which specifies in 'prefect markets'.
I'm afraid I'm not sure what you are trying to get at here.
Sure. I wasn't referring to you when I said formal, but English is definitely fluid – you can define anything however you want. Restaurants notably have seen a sharp decline in patronage in the last year as rising prices have pushed people to find other, more affordable, places to eat outside of the food service market. Does your definition mean there is a shortage of restaurants?
These are inseparable concepts. It's supply and demand, not supply or demand. In a normally functioning market, a supply chain struggling to produce something people want to have will raise prices to start to scare some buyers away. All else equal, a rise in price will see a decrease in demand. At some point an equilibrium will be found.
Formally speaking, a shortage occurs when that price is unable to rise. This means demand has no reason to change, but the supply issues persist. Instead, you have to use some other control mechanism to deal with the scarcity. First come first served, need-based, and a lottery are some other mechanisms used to work around price not being a functional tool.
If you have ever visited a medical doctor in Canada, which for patients are capped at zero (they are prohibited from accepting payment from you), you may have also felt a shortage. They typically utilize a mixture of first come first served and need-based control mechanisms to determine who gets to see the doctor and who might not. If there was such no cap, the rich would roll in and drop some big money to push themselves to the front of the line, but as you know that's not allowed to give poor people equal access.
First come first served or a lottery probably isn't how you want to choose who gets food. That implies someone is going to miss out. Rationing works quite well, though, as proven by the US during the period they imposed price caps.
There has to be some other control mechanism if you remove price as the control mechanism. Rationing is a perfectly fine solution for controlling something like food, but the question remains: Are we prepared to accept that? I struggle to see a "food will now be rationed" declaration going over well.
My first point was about part of the reason you're getting a negative reaction is that you're declaring your personal definition of a shortage is a formal definition which is basically claiming that experts agree with you. Please support this claim or stop making it.
Restaurant patrons aren't buying the restaurant, they're buying food and ambiance etc. Can you give some examples of people looking for what restaurants provide outside of the conventional market?
Yes shortages don't occur in an ideal market, but ideal markets don't occur in reality.
Stores can only raise their prices so many times per day (like physically). Toilet paper factories can only make so much toilet paper in a day they can't increase production much at the drop of a hat. If I went to the pharmacy and there wasn't any toilet paper and I went grocery store and there wasn't any toilet paper, the normal market can't meet demand so I have to go outside the normal market to get some, that's a shortage. It's a shortage whether or not there was a price cap, the fact of the matter was that there was no inventory in the conventional market, that market had a shortage. It doesn't matter what the price tag on the shelf says, if there is nothing on the shelf, there is a shortage. Yes price caps often create shortages, but they aren't identical to shortages.
Formally according to whom? Shortages seem to occur even when price are allowed to rise.
Medical salaries aren't what cause doctor shortages in Canada. The shortages are caused by supply restrictions. The government and college of physicians in medicine restrict the number of doctors allowed to enter the work force (to limit expenditure, and keep individual earnings high respectively). Many physicians operate on a fee for service model so while the fees are fixed (renegotiated every few years) so in many cases there isn't really a limit to how much a doctor can earn. In fact increasing doctor pay sometimes reduces doctor supply, because now they don't need to work over time to maintain their level of spending.
I'm still not sure I understand. I feel no negativity. I have no feelings towards this at all. One would have to be quite unhinged to have feelings about a definition of a word. There was that really super strange, emotionally-packed "Neo-liberal" rant above, but that was not me. Perhaps that is the mixup?
That is quite true. What I mean is a shortage of the service a restaurant provides. I indicated it was a food service market, not a business market, so it seemed clear enough from my vantage point. I don't see how a food service market could sell a business? Is it fair to say a food market sells farm businesses? But, indeed, communication is hard.
Totally. That is another possible external mechanism which could see price being prevented from rising.
Nobody said anything about salaries. In fact, the majority of doctors in Canada are self-employed, so a doctor collecting a salary, while not completely unheard of, would not be common enough to speak to around doctors broadly absent of a declaration of a personal definition which includes the self-employed. Formally, salary only refers to employee -> employer relationships.
Are these repetitive misinterpretations a result of me not being clear? I stated the cap was zero, which alone should indicate that it is not in reference to any kind of salary or billing, and I gave even more detail about what was meant in the parenthesis, so it again seemed like there was enough information there. How can I do better to make myself more clear next time?
The accusation someone made that you were a crazy neoliberal was because when you said:
You were saying that price caps ARE shortages. Which is ridiculous and untrue. It seemed you were saying that there wouldn't be shortages if there were no regulations. Which is ridiculous and untrue. You probably should have decried the injustice of our food distribution system before saying there isn't a food shortage. Like when Haitians were eating mud so they wouldn't feel hungry while starving to death, you should acknowledge the injustice and dysfunction of the market, and propose better terminology.
If you had said where you were getting your definition from I could have understood why you were insisting your definition is correct while failing to capture some pretty obvious failures of the market.
I think you believe you're using the definition as it's given in Wikipedia for example. But read what it says carefully:
It's the second sentence that's the definition of a shortage. The first sentence is a cause of shortages, but the shortage is inadequacy of supply described in the second sentence.
I was lazy with terminology re doctor salaries I understand the distinction but didn't think it was important. I thought you were saying that if doctors could be paid more there would be more doctors this alleviating the shortage. You were actually saying that if people had to pay incrementally for medical care, there wouldn't be a shortage because people would decide they didn't want it.
It wasn't clear because you didn't specify price cap. Medical service doesn't really occur in classical market at all. There is a price but it's paid through insurance contributions implemented through the tax system. Medical service is also a terrible example of basic market principals because medical service isn't a commodity. The value of critical life saving treatment is all the money the buyer has.
I said no such thing. It is very much possible there was miscommunication, but when something doesn't seem quite right, one interested in the topic will ask questions to try and resolve the discrepancies, not double down on the miscommunication to shit up the thread. There is no rational explanation for that "Neo-liberal" comment.
That is not a separate definition. The second sentence in your quote further explains the concept described in the first sentence to those who don't have a well rounded understanding of economics and how price is used as a scarcity control mechanism. It fails to stand on its own as it needs the context from the first sentence to be understandable.
I get the feeling we have yet another miscommunication on our hands here. My best take is that you are trying to say is that I was being too technical for an audience not familiar with economics and that I should not have left them needing to do some research of their own to understand the bigger picture the original definition exists in. Am I close?
You said:
That's what those words mean. Read what you wrote carefully.
"A shortage is when..."
"...there are price caps (or something similar)"
Therfore you said:
"A shortage is when there are price caps (or something similar)"
That's what you said.
Yeah, that's why I asked who is using that definition, and proposed one I liked.
Does not need additional context to be understandable. It's what a shortage is. It may mostly be caused by price rigidity, but the price rigidity isn't the shortage (which IS what you said).
I'm saying that if someone objects to the way you're defining something show them where you got the definition. And if you insist that your definition is correct make sure you said what you think you said.
I'm afraid I don't follow. "Price caps" isn't even mentioned in the definition. Indeed, price caps are one possible external mechanism, but hardly the only possibility. Perhaps you can explain how you see "external mechanism" equating to price caps and price caps alone?
Again, I don't follow. There was nothing said about price being unable to fall. Where do you see rigidity coming into play?
Also, it says that a shortage is a situation where price is unable to rise, not a shortage is when price is unable to rise. This situation is that, with loss of the default scarcity control mechanism (price not being able to rise) during periods of rising demand or declining supply, demand is able to exceed supply. Exactly what you also say a shortage is. For the sake of improving communication in the future, can you explain to me how this was not clear?
The definition is technical. It requires some understanding of economics to grasp. Your entire paragraph definition is more approachable – but also excruciatingly long for a formal definition. As the grander discussion is about economics, we're not talking to people who don't have some understanding of economics, so we can safely use technical terms. Anyone here in good faith that does not have such understanding is going to develop that understanding before going any further.
While "formally" already indicates where the definition comes from, logically where the definition comes from is irrelevant. I can speak to it myself to anyone who wants to have a conversation and not go down some totally bizarre "Neo-liberal" road. If you would rather read someone else's work, why be here?
And if repetitive miscommunication means that I fail to speak to it, oh well? It makes no difference to me if someone does not take anything from it. Who cares what someone else thinks? That's their problem. It is not my job to educate them and I have absolutely no desire to become a teacher – especially for free. Do you really believe that I need to work as someone else's teacher for free or have we miscommunicated again?
Try again.
Try what again?