What happens when there is no market and no prices? We examine the mechanisms of economic systems through the causes and consequences of shortages and analyze the reasons for communism’s failure.
What happens when there is no market and no prices?
In February 2022, Pokémon Bread was relaunched in South Korea. Each loaf came with a sticker featuring one of over 100 Pokémon characters, and it became an instant sensation. Immediately after its release, it sparked a massive sell-out frenzy, setting a new record by selling 10 million units in just 43 days.
At the height of its popularity, people began lining up at stores at the exact time deliveries arrived. Stories flooded social media of adults and children alike chasing delivery trucks to buy the bread. Pokémon Bread remained scarce throughout 2022, only becoming easier to find by winter.
This case suggests there was an issue with the price of Pokémon Bread. According to the simplest economic model, the appropriate price of a product is determined when buyers and sellers propose prices. This is called ‘market equilibrium’ or the ‘equilibrium price’. When market equilibrium is established, demand and supply match, preventing shortages.
Causes and Severity of Shortages
For a shortage to persist long-term, two prerequisites are necessary. One is that supply is insufficient relative to demand. When a product suddenly becomes popular, demand increases rapidly, but supply cannot increase as quickly. To produce more goods, companies must purchase additional raw materials, hire more workers, or pay overtime to extend factory operating hours—all of which require significant time and expense. If supply still falls short, building new factories or expanding existing ones is necessary, incurring further costs and delays. Moreover, goods like automobiles or housing are difficult to produce quickly.
Meanwhile, companies find it hard to predict whether the popularity of a specific product is a one-time event or will persist long-term. Kkokkomeon, which gained explosive popularity in the ramen market in 2011 and was selected as one of the ‘Top 10 Hit Products’ by the Samsung Economic Research Institute, saw its sales decline starting in 2012, causing difficulties for the investing company. Similarly, Honey Butter Chips, launched in 2014, gained immense popularity, but the company, concerned it might be a short-lived trend, refrained from significantly increasing supply. This led to a shortage lasting about a year.
Another factor is when prices remain fixed for some reason, or when price increases are insufficient. When demand outstrips supply for a popular item, raising prices typically boosts sales—a fundamental economic principle. If prices rise sufficiently, more buyers abandon purchases, reducing demand. This eventually leads to an equilibrium price, resolving the shortage. However, the Pokémon Bread shortage worsened because the selling company refused to raise prices.
Consequently, some people resorted to illegal practices like bundling Pokémon Bread with other items for sale, or middlemen diverted the product. Additionally, people began trading it on online secondhand sites at prices higher than the retail price. Those buying and selling Pokémon Bread for arbitrage further fueled demand, intensifying the scarcity.
The reason such difficulties don’t arise in everyday life is, of course, price. For most goods, prices rise or fall appropriately according to supply and demand. When a product becomes popular, its price increases, prompting companies to boost production to earn more profit. Ultimately, price serves as the mechanism that communicates these shifts in demand. As a result, over time, production of popular goods increases, satisfying consumers’ growing demand.
Meanwhile, the first-come-first-served queue could be seen as an alternative distribution method for those who “desperately want Pokémon bread.” Compared to the market economy’s price principle, which expresses the degree of desire for a product in monetary terms, queuing—which expresses it in “waiting time”—also has a fair aspect. While people have different amounts of money, 24 hours are given equally to everyone without exception. Therefore, spending time with loved ones, family, and friends is one of the important ways to express one’s feelings.
However, distributing all goods this way would be too cumbersome and inefficient. If prices are absent or fixed at non-equilibrium levels, supply and demand mismatches frequently occur for many goods. Some items might be so hard to get that you have to line up at the store when they restock. If you absolutely can’t buy it, you might have to purchase it at a very high price on the secondhand market. Other items might be so abundant that you end up burdened with excess inventory or have to dispose of it. The inconvenience can become so great it’s hard to put into words.
Another example is the controversy surrounding taxi fare increases in South Korea in 2022. Since taxi fares are set by the Korean government, they cannot respond immediately to changes in demand. In the summer of 2022, more people wanted to use taxis, but low fares reduced taxi supply, causing consumer inconvenience. Consequently, fares were raised that winter. This time, however, the price hike was excessive, leading to decreased demand and an oversupply of taxis.
Why did communism fail?
This has been sufficiently proven historically. From the end of World War II until 1990, the regions now comprising Russia, Eastern Europe, and China adopted communism, operating economic systems that excluded market economies and private property. The over 40-year systemic confrontation ended with the complete victory of the market economy and capitalism. Government-led distribution of all goods, bypassing market price mechanisms, proved highly inefficient. Moreover, the denial of private property failed to sufficiently motivate people to work diligently.
China actively introduced market economy elements after 1990, becoming a pillar of globalization and vigorously initiating international trade. Thanks to this, China achieved remarkable economic development and established itself as a core nation in the global economy. While aspects of excessive government control over the economy remain, China fundamentally embraced the market economy system, and this became a major driver of its economic development.
This does not mean everything should be left to the market. Government intervention is sometimes necessary. However, experiments rejecting the market economy system have failed, and history, as well as our surroundings, clearly show how inconvenient and problematic life becomes without markets and prices. To overcome the shortcomings of the market economy system, we must not dismantle it, but rather find ways to supplement it from within.
