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Hundreds of thousands of people converged on the nation's capital to witness the inauguration of Barack Obama. The select few who were lucky enough to secure tickets to the swearing-in ceremony viewed the event from the Capitol's lawn, while over a million ticket-less onlookers watched the ceremony on giant projector screens at the National Mall. But the event was not just a real-life lesson in Civics 101. It was an invaluable lesson in economics and a reminder of the problems that arise when government controls the distribution of resources. Given the current economic crisis and the power wielded by the executive, it is a lesson to which President Obama should listen carefully.

Tickets to Obama's inauguration were in extremely high demand. Unfortunately, markets did not allocate access to this scarce good; the government did. Members of Congress were each allotted a couple hundred tickets to distribute freely to their constituents with only one rule: they were to be given out for free. But days after Obama was elected president, congressional offices were flooded with thousands of requests for tickets to the historic event. With no pricing mechanism for allocating the tickets, which were going for as high as $40,000 on websites claiming to sell tickets, the government resorted to its favorite form of distribution: the political process.

Given discretionary power to distribute tickets however they pleased, Congress provided first dibs to lobbyists, high-dollar political donors, and whomever else they owed favors. Predictably, many elected officials were vague in describing how their tickets were distributed. Some claimed to have used lotteries to give out tickets by "random selection." Most refused to disclose where the tickets went, while others acknowledged that some went to "friends and family."

Although the inauguration was publicized as the most accessible in history, multiple reports indicated that, despite Obama's pledge of transparency and responsibility, special interests played a highly influential role in the inaugural affairs. In the week prior to the inauguration, The Wall Street Journal reported that lobbyists and corporations found loopholes in the latest congressional-ethics law that "allow[ed] them to pay for special access to lawmakers and members of the incoming Obama administration" during the inaugural festivities. By skirting ethics legislation, lobbyists attended lavish VIP inaugural events by paying big money — up to $55,000. These events allowed special-interest groups to brush shoulders with some of the most influential members of Obama's administration.

The government also attempted to ensure that it had exclusive power to distribute inaugural tickets by prohibiting average citizens from selling them. Senator Dianne Feinstein passed legislation through the Senate that criminalized the sale of inaugural tickets. In addition, Feinstein secured voluntary agreements from online auction websites such as eBay to ban ticket resale.

"These tickets are supposed to be free for the people," said Feinstein. "Nobody should have to pay for their tickets."

However, many did pay for a ticket, but the payment was to the government. The Presidential Inaugural Committee (PIC), of which Feinstein is a member, distributed tickets in exchange for up to $50,000 in inaugural contributions.

Senator Feinstein's double standard is clever if you're a politician. If free people were able to sell their inaugural tickets, then they might not go to the politically appropriate authority, as deemed by Feinstein and her political cohorts.

Indeed, most of the tickets distributed by the PIC went to the well-connected elite: campaign donors, lobbyists, and party loyalists. According to the watchdog group Public Citizen, more than half of the inaugural financers who donated $300,000 to the committee were also lucrative donors for the Obama campaign. Among the 211 fundraisers that helped fund over $27.6 million for the inauguration were executives of firms receiving financial bailout money from the federal government such as Citigroup and Goldman Sachs.

The inauguration episode is replete with valuable economic lessons that many in Washington, the media, and voting booths across the country should understand about the government's precarious relationship with economics. For one, the government cannot suspend the laws of supply and demand, regardless of whether they subsidize, regulate, or criminalize the market. The "free" tickets to the inauguration were far from free, as supply was dwarfed by an enormous demand, and obtaining a ticket required either lots of money or cozy political connections.

Second, when governments, instead of markets, ration scarce resources, their performance is dismal. Shortages and incompetence are commonplace in government-run economies, because no amount of design by government planners can anticipate the myriad demands of the people. Government planners do not face the incentives provided by competition in private enterprise. The inevitable result is poor management. The thousands of ticket holders who were kept out of Obama's swearing-in ceremony know this well. Inaugural planners mismanaged some of the entrances, leaving them stranded in an overcrowded traffic tunnel and left out of the historic event.

Lastly, when the government is given the power to control such scarce and valuable resources, political favors and special interests hover like vultures over carrion. Lobbyists line up at the trough of government largesse, while politicians, eager to gain reelection, engage in political quid pro quo.

The politically charged allocation of inauguration tickets and other favors to those who are well connected is a sad reality of politics. It is a reality that our new president needs to realize in the midst of our economic troubles. Despite platitudes of responsibility and change, the administration's near-trillion-dollar economic stimulus package is laden with political favors and other vote-buying schemes.

The lessons learned from the unseemly distribution of Obama's inaugural tickets should give him pause regarding his first acts as president. His record-sized stimulus bill ignores the corrupting propensity Congress has to distribute favors to constituents out of the taxpayer's purse. In addition, it rests on the dubious assumption that government can better decide where resources should be devoted.

Regardless of mantras of change, politics is unlikely to change unless President Obama heeds the lessons learned from the inaugural ceremony. His first move should be a drastic reduction in the government's size and scope. Sadly, I think I am more likely to get a ticket to the next inauguration than to see that happen.