The question is whether in this sort of a system, it should be legal to sell ration tickets--which converts it back to a wealth-based system...

Well, yes and no. It turns it into a wealth-based rationing system with built-in redistribution. Which is a different kind of beast, because it ensures that only the surplus above stark necessity is traded in the wealth-based rationing system.

Conventional utility theory claims that this is equivalent to a pure price-rationing system, because conventional utility theory tacitly assumes that aggregate utility is independent of the income distribution. In the real world, of course, the mechanics are very different: A rationing system with saleable coupons provides a fixed price for the bulk and a floating price regime at the margin.

Now, as any properly schooled Serious economist will tell you, the market-based microeconomics works only at the margin - the bulk price is irrelevant. And as any small-"s" serious student of the real industrial economy will tell you, the cost of price volatility in the bulk is considerable. So a rationing system with tradeable coupons will (in theory) combine the best of both worlds - microeconomic incentives work where they matter (if they matter at all) and macroeconomic planning isn't disturbed by the wild price swings that accompany rationing-by-price.

Incidentally, releasing prices and production volumes at the margin but retaining price and volume controls for the bulk was how China transitioned from a command economy to whatever it is it has at present. Russia provides the other example - there, bulk prices were allowed to float at the same time as the margin prices. I think the different trajectories of those countries amply demonstrate the difference between the two systems of rationing...

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.