Thursday, March 06, 2008

Gluts and Shortages (Prices Change)

Prices change, but many people seem to wish they didn't.

There's a housing glut in the country. Do a Google search for that term in quotes and you get 14,000 hits.

Meanwhile, there's also apparently a nursing shortage. A Google news search for nursing shortage yields about 600 hits.

So why is there a housing glut and why is there a nursing shortage? The answer for why there's a housing glut is because many sellers of houses are hanging on to the hope that they can get what people were selling houses for a year or so ago. Lower the prices and you'll no longer have a housing glut. Waiting for a higher price may be economically sensible for an individual homeowner, especially if they want to move locally or are at least not in a major rush to move out.

There's a nursing shortage because hospitals and doctors don't want to raise nursing salaries as much as they should. If they raised the salaries, they'd no longer have to worry about filling all their available spots. Of course, it takes a while for this to fully take effect: someone can't become a nurse instantly. But if salaries were raised, perhaps some stay-at-home moms with nursing degrees would venture back into the workforce.

In a market economy such as ours, you should rarely have gluts or shortages in anything - goods or services. You may sometimes, like in a hurricane. But the media seems to report that gluts and shortages are a regular aspect of our lives. However, while there may be a lot of houses for sale at present, what there really is is that there are a lot of houses that are on the market at above market rates. And while there are a lot of nursing positions that are open, the employers don't think these positions are that essential, as they havn't boosted the salaries for these positions.

The house sellers may not get as much as they could have in the past, and the hospitals may have to pay more than they did previously, but that's the market. Prices move up and down, and trying to get an old price will be difficult.

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