Order and Disorder
There is an equivalence between a tariff and a quota as these are drawn on the blackboard…They are not, however, equivalent in practice. A tariff and a quota generally involve different institutional frameworks…With the quota, the distribution of sales across vendors and the specific types of products sold are not determined through ordinary commercial arrangements. Rather, they are determined through a political process where those who hold offices of political power are able to award allotments to the particular vendors that those holders of power choose. A quota necessarily injects venality, inequality, and hierarchy into political practice and changes the character of effective commercial conduct. What economists refer to as rent seeking (Tullock 1967)(Rowley, Tollison, and Tullock, eds. 1988) and rent extraction (McChesney (1997) will flourish under quotas, and such activities may eventually come to comprise new norms for commercial conduct.
Today in class I talked about order and disorder. My point was that markets produce an orderly outcome–for example, there are no shortages or surpluses. As examples of disorder, I used the gasoline lines of 1974-75 caused by price controls and the impact of rent control on the supply of rental housing in New York City.
But reading this paper reminds me of another good example–how we deal with alcohol, tobacco, and recreational drugs. By using taxes, we retain the order of the market place. By making recreational drugs illegal, we create huge disorder, including criminal gangs and murder.
Peter Boettke recommends Wagner’s book, which retails for $110. That’s when I decided to look up the paper.