Reading Assignment #12- Euvoluntary Exchange, Exchange is Immoral

A.
I am extremely happy that I chose this article to read as I found it to be a fascinating and fun article. Even more than that, I thought it very much applied to what we are learning in class about rationing mechanisms (specifically the one about rationing mechanisms and lottery) as well as how over regulation of government can lead to stagnation (which has been an underlying theme of many lessons throughout the semester.)

One aspect of the article I found interesting was how the author "Mungowitz" shows how little options students have with a lottery. We have learned that the lottery rationing mechanism is not really ideal because it:

• Does not provide people with an opportunity to get what they most value
• Makes it difficult to plan for the future

For the students at Duke, and in the article's case, the fraternity Iota Tappa Kegga (ITK), certain students desire certain residential areas for specific reasons. ITK wanted a hall close to campus that is generally noisy. 

But because of the lottery, and the limitations the Duke housing office placed on students, it was impossible for them to get what they wanted if they could not find a willing group with whom to trade. 

This goes back to the barter economy lesson we had- without being able to pay another group for the housing they wanted, ITK would have to waste a lot of time searching for a group with whom to trade. All of that wasted time would come at a huge opportunity cost for EVERYONE in society because of how much time ITK could have used to produce or do something else more productive, even if it was just for their own well-being.

I found it very interesting- and completely mind-boggling- how the Duke housing office would not allow students to exchange money for the housing they wanted. If they allowed this, everyone would be better off. ITK would have gotten what they wanted, the baseball stat group would have gotten what they wanted, everyone would have been happier and better off. It just makes absolutely no sense why Duke administrators would not allow this.

I also found one point made by Mungowitz to be eye-opening. In his article, he writes: "One of the features of a lottery, of course, is that the assignment of a group to a space allocation has zero, zilch, bagel, nada to do with how much that group VALUES that location."

This is so true and explains why a lottery is such a poor rationing mechanism. People have different wants and wishes, and in the case of the housing at Duke, a lottery gives people certain housing in spaces that they may not want at all. A lottery limits the options of people and when "exchanging" has been outlawed, much more people lose out than would have if Duke just allowed people to exchange or ration the housing by a price system- that way, everyone would get the housing at a price each party values.

B. 

1. Why does the Duke University housing office feel the need to control the students and not allow them to exchange? In other words, what makes "trading" acceptable, but "exchanging" not acceptable.
2. Is the regulation that Duke's housing office imposes that types of problems we face with over-regulation in everyday society by governing bodies? If these types of regulating-bodies were not in existence, would we be better off?
3. Would anything actually go wrong if Duke allowed people to exchange housing in the format that the author "Mungowitz" shows? Obviously the Duke housing office is concerned that something bad will happen as a result of money transfers, so would whatever they are worried about come to fruition if students still went ahead and exchanged money as part of the housing trade?

C.

In this article, the author Mungowitz explains a scenario at Duke University in which the housing office prohibited students from exchanging.

It all started when Duke's housing office (DHO) decided to implement a lottery system to ration out residential halls.

As a result of this, many Duke students considered making trades to get the housing the wanted. Except these weren't normal trades, these were exchanges, where groups would exchange houses and in some instances, even money. As Mungowitz points out, this money is often referred to by economists as "side payments."

The example that Mungowitz gives is that the Baseball Stats Study Group (BSSG) gets placed to live in the middle of campus where it is noisy and ITK gets placed off campus. But ITK wants to "be in the middle of things" and BSSG wants a quiet area to study (it is loud in the middle of campus) but also likes the location of the middle of campus because it is close to the academic buildings.

To offset the cost, ITK would be willing to exchange residential areas with BSSG and give BSSG added compensation ($5,000). BSSG valued having $5,000 and the off-campus residence than just having the on campus residence while ITK valued giving up $5,000 and having the on-campus house than living off-campus.

Thus, everyone is happy and everyone is better off because each group gets what they value. 

But then, the DHO found out about the monetary exchanges going on, as these were not the oly two groups exchanging this way. DHO was outraged and sent out a letter to the students, effectively making it illicit to "exchange" where money is involved, but legal to "trade" housing residences as long as no money is involved.

Mungowitz questions the motive behind the DHO doing this (as do I). By enacting this rule, it prevents people from making an exchange that would better countless groups around campus and make people wealthier. 

I wonder if the DHO would be more willing to legalize these "exchanges" if they received a portion of the money being exchanged. 

Based on my experiences dealing with the U of R financial aid office and the like, I have to think that the DHO would indeed be more willing to allow these transactions if they received some of the pot (in short, it is all about money!!! currency!!!- this is especially true in a world where almost everything is rationed through the price system!!!)