Thursday, September 01, 2005
NO Price Controls!
In the aftermath of the worst natural disaster in our country's history, Hurricane Katrina, comes the inevitable reports of price gouging and calls for the government to institute price controls. At the top of the list of the products whose prices we Americans think government should control is gasoline. Gasoline prices have been rising for several months anyway and Katrina will further push up those prices. This is the natural order of disasters.
Nobody likes high gas prices but setting artificial prices for a heavily demanded product will only hurt the supply/demand cycle, not help it. I remember the price controls President Carter imposed in 1979. They didn't work. They will not work now or ever. The only thing imposing limits on gas prices will do is make some people feel like they've done a good deed. They are not good deeds.
We live in a capitalistic economy. There is no other economic system in mankind's history that works any better than capitalism. The economic laws of supply and demand are natural laws and messing with prices will only upset this natural order. There is a shortage of gas right now for various reasons, not the least of which is a distribution problem, simply getting the existing supply to where it is needs to go. Price controls will not help distribute this gas any faster, in fact, they will more likely create even more shortages.
I understand the reasons why people and politicians think setting limits on how much a business can charge for an item will help the situation. When prices go up very quickly, people's pocketbooks feel the pinch. The natural reaction for many is to limit the top price, to keep the hurt of high prices away for awhile. But the supply and demand equation is something akin to physics, it has its natural laws and any outside tinkering with these laws will cause ripple effects elsewhere in the supply/demand chain. It is best left alone to work itself out by its own devices.
Sure higher prices for gas will be painful but it is a temporary pain. The market works. Suppliers will boost supplies as prices increase and demanders will lust for less as these prices increase. A stasis will be achieved if we let the system work. If there is too much product relative to the demand the prices will fall and/or the demand will fall. If there is not enough demand for the product, the prices will increase and/or the supply will increase. It is simple Economics 101. It is also common sense.
Government is not responsible for private business supply and demand cycles. Government is not there to cater to our every need. Government governs best that governs least. Don't know who said that but it is so very true. And government has no business with the supply/demand cycle. except, perhaps, to release some gas from the Strategic Petroleum Reserves which are there for emergency situations only. I would call this disaster an emergency and agree that the SPR should be used in this sutuation.
But had we listened to the eloquent Richard Schumer, Senator from New York, who has been long calling for the president to release the reserves to help lessen the increasing prices of gas, we would now be out of reserve gas and none would be available for this emergency. Stupid is as stupid does.
I truly think that most Americans are smart enough to know that economics, the normal supply and demand process of capitalism, is not something the government should be manipulating. There is no right to cheap gas. It is the fringe groups or the extremists that scream loudly to make their idiotic demands heard while most people simply adjust their habits to deal with the situation at hand. Like I said, stupid is as stupid does.
Hopefully the government will resist the urge to feel good and let things play out on their own. If they really want to help the gas price situation, what they should do is reduce the restrictions on environmental regulations. My hat's off to the EPA yesterday for doing just that, temporarily removing environmental regulations to allow the supply chain to work faster. Considering all the different blends of gasoline in this country, blends demanded by environmental laws about air emissions, it is a wonder we haven't had a shortage before now. There is no sane reason why different parts of the country need different blends of gas. If it were all the same blend, there would be less strain on our refineries and distribution systems in the first place and emergency situations would be easier to deal with.
Get the governments out of supply and demand equations. Let the sytem work. Do not ever bow to public pressure to fix prices. Popular choices are not what this government's about. Capitalism does not need any government's assistance. Capitalism needs to be left alone. If you want to spend less on gas, drive less, drive a motorcycle or a smaller car or make some other change in your habits, but do not allow government to control prices. That is a road to ruin.
OH
Nobody likes high gas prices but setting artificial prices for a heavily demanded product will only hurt the supply/demand cycle, not help it. I remember the price controls President Carter imposed in 1979. They didn't work. They will not work now or ever. The only thing imposing limits on gas prices will do is make some people feel like they've done a good deed. They are not good deeds.
We live in a capitalistic economy. There is no other economic system in mankind's history that works any better than capitalism. The economic laws of supply and demand are natural laws and messing with prices will only upset this natural order. There is a shortage of gas right now for various reasons, not the least of which is a distribution problem, simply getting the existing supply to where it is needs to go. Price controls will not help distribute this gas any faster, in fact, they will more likely create even more shortages.
I understand the reasons why people and politicians think setting limits on how much a business can charge for an item will help the situation. When prices go up very quickly, people's pocketbooks feel the pinch. The natural reaction for many is to limit the top price, to keep the hurt of high prices away for awhile. But the supply and demand equation is something akin to physics, it has its natural laws and any outside tinkering with these laws will cause ripple effects elsewhere in the supply/demand chain. It is best left alone to work itself out by its own devices.
Sure higher prices for gas will be painful but it is a temporary pain. The market works. Suppliers will boost supplies as prices increase and demanders will lust for less as these prices increase. A stasis will be achieved if we let the system work. If there is too much product relative to the demand the prices will fall and/or the demand will fall. If there is not enough demand for the product, the prices will increase and/or the supply will increase. It is simple Economics 101. It is also common sense.
Government is not responsible for private business supply and demand cycles. Government is not there to cater to our every need. Government governs best that governs least. Don't know who said that but it is so very true. And government has no business with the supply/demand cycle. except, perhaps, to release some gas from the Strategic Petroleum Reserves which are there for emergency situations only. I would call this disaster an emergency and agree that the SPR should be used in this sutuation.
But had we listened to the eloquent Richard Schumer, Senator from New York, who has been long calling for the president to release the reserves to help lessen the increasing prices of gas, we would now be out of reserve gas and none would be available for this emergency. Stupid is as stupid does.
I truly think that most Americans are smart enough to know that economics, the normal supply and demand process of capitalism, is not something the government should be manipulating. There is no right to cheap gas. It is the fringe groups or the extremists that scream loudly to make their idiotic demands heard while most people simply adjust their habits to deal with the situation at hand. Like I said, stupid is as stupid does.
Hopefully the government will resist the urge to feel good and let things play out on their own. If they really want to help the gas price situation, what they should do is reduce the restrictions on environmental regulations. My hat's off to the EPA yesterday for doing just that, temporarily removing environmental regulations to allow the supply chain to work faster. Considering all the different blends of gasoline in this country, blends demanded by environmental laws about air emissions, it is a wonder we haven't had a shortage before now. There is no sane reason why different parts of the country need different blends of gas. If it were all the same blend, there would be less strain on our refineries and distribution systems in the first place and emergency situations would be easier to deal with.
Get the governments out of supply and demand equations. Let the sytem work. Do not ever bow to public pressure to fix prices. Popular choices are not what this government's about. Capitalism does not need any government's assistance. Capitalism needs to be left alone. If you want to spend less on gas, drive less, drive a motorcycle or a smaller car or make some other change in your habits, but do not allow government to control prices. That is a road to ruin.
OH
# posted by OH @ 7:10 AM 
