The Efficiency of the Price System: Evidence from an Alternative Market
10 Pages Posted: 8 Apr 2003
Most economists take it for granted that a price mechanism is usually the most effective means of resource allocation. This paper compares two methods of allocating resources in the thoroughbred racing market: a price mechanism and bureaucratic restrictions. It is shown that a simple price mechanism does a superior job of allocating racing ability than a myriad of conditions and restrictions set by even a highly informed expert.
Keywords: Resource allocation, racing, thoroughbred
JEL Classification: A1, D4, G0, L8, P0, P5
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