Trying to suppress the irepressible

Based on article from The FT Magazine, 17 July 2006

Tim Harford, the Undercover Economist, discussed irrepressible markets in this weeks FT Magazine. Take the example of a school student who exploits that fact that the school has banned vending machines and the tuck shop. Having spotted the market opportunity, the school student now buys drinks and sweets and sells them for profit in school. The schools’ reason for wanting to stop him is that the children are content without it but then he wouldn’t be making £50 a week.

Harford describes suppressing a market like squeezing a balloon. Once squeezed, it will pop up elsewhere. Trying to stop it results in failure, as shown by the sale of football tickets at events such as the World Cup. Touts provide a service here but due to the limited supply, prices are consequently high.

Markets for prostitutes and rhino horn are however suppressed for different reasons. They are bad for both the unwilling prostitute and the rhino. However, banning it doesn’t stop it from happening. Heroin is banned because the government feels that addicts cannot be sensible about it and the same is for the sweets sold by the school child. It may cut consumption, but the side effects can be dire.