In a perfectly competitive market, goods or services are allocated to those who value them most.......?

Question

Should university (or college for US) places be allocated in this way?

Answer 1

The problem is that in a competitive market you do not pay attention to the value itself but to the value in terms of money, and money does not translate effectively the value of things. That's why we also need politics, culture, art, and even love.

Answer 2

I think that you have missed a fundamental aspect of microeconomics, which is that as you move further down the demand schedule, it is marginal benefit that increases, not value. A decrease in price represents an increase in consumer surplus, not value. What you are trying to say is that under perfect competition, prices are lower than under monopolistic markets, where output is fixed at a profit maximising level, boosting prices above that in a Walrasian marketplace. Anyway, to answer your question: with regards to university, places should be allocated based upon the amount you deserve them. You should not just lower prices so consumers' surplus is higher, you should impose a quota upon the number of university places to avoid overcrowding. With quotas comes an increase in the quality of the good, in this case students. If you are only allowed so many oranges per day, you will pick the nicer looking ones to eat. Also with students, unis will pick the ones that are more likely to enhance their uni status and be of benefit to society. There is much literature on this kind of topic (microeconomics)- I recommend you read a bit more to get a flavour for the bigger picture.

Answer 3

This is the classic argument in favour of capitalism. The flaw is that perfect competition allocates goods and services to those who can afford them, not those who need them most or who can use them most effectively. So hundreds of millions of dollars are wasted on developing rubbish like Viagra and giving cosmetic surgery to neurotic showbiz stars while millions die of malaria, sleeping sickness and infant diarrhoea because they can't afford treatment. Farmers here in NZ are switching from food and fibre crops to growing flowers for export at the same time as queues are growing outside food banks and soup kitchens. If college places were allocated like this, and to some extent, in capitalist countries they are, intelligent kids with no money would be wasted. Free market economies simply don't deliver the goods.

Answer 4

Yes. I think the correct statement is that resources are allocated to their highest valued use. Any other way resources are diverted from their most valuable use to some other lesser value use.

All other methods for allocation of resources result in squandering resources for low value uses. Like studying the viscosity of ketchup, mating rituals of obscure insects, or for subsidizing art that no one would pay for otherwise.

Answer 5

the only problem is that is is NOT a perfect competitive market. people (the admission staff) will probalby have bias still.
there is a research in the University of California (i forget which campus) that if admission was only based on SAT scores, then 90% of the school will be Asian. in which alot of people would then complain about the school being racist, thus causing bias again, and then ruining the "perfectness" of the competitive market