When supply equals demand—in economic models, not Alchemy—the price is calculated, equilibrium is achieved, and angels sing. What economists do we aren’t sure. Rarely does this work because value is subjective. Our relativistic nature is seen when it’s less grating for a CEO to make 100 times their employees than for a peer to make double.
However solving for the equilibrium is a helpful. This Phantom Cowen would lead us to ask about how we might design a system people can’t buy, favor, or cheat their way into? How do we fix the game and avoid equilibirum? It’s been done with Jeopardy and horse racing.
Enter the NYC marathon.
The NYC marathon is super popular. The race welcomes 53,000 people, the most in the world, but demand is triple the supply. If this were a business, the organizers could raise prices. Pricing power! But profits aren’t the goal.
“At New York Road Runners, it is our goal to give everyone on the planet both a reason to run and the means and opportunity to keep running and never stop.”NYRR Mission
Rather than raise prices, the NYRR had to solve for the equilibrium another way. In Planet Money episode #962, host Kenny Malone explains how the running club allocates their scarce resources. How they solved for the equilibrium.
What’s great about this example—beyond the process—is the creative ways NYRR solved their problem. They’ve added value without addressing the race.