Let's drop the "price gouging" talk please

There has been talk in the news about gas stations "price gouging." At the same time there has been talk about gasoline shortages. This is talk from people who are economically illiterate.

When an item is in short supply, prices rise until enough people decide they no longer want to buy it at that price. If the government prohibits sellers from raising prices, then we wind up with shortages, preventing people who really need the gasoline from buying it, and forcing people to waste huge amounts of time waiting in lines at gas stations.

At this time we need to let gas stations charge as much as they want. Maybe $7/gallon gas over Labor Day weekend will discourage some people from driving to the beach, allowing time for the supply situation to be rectified.

I personally am disgusted that people are so concerned that it costs more money drive to the beach this weekend while thousands of people are trapped in New Orleans without food and water.

Comments

[Scott S]

Hey, you *do* have an understanding of economics - I was getting worried. Or, much like your stance on banning smoking in privately-owned businesses, is this position only taken by you because you have the money to buy gas at the increased price and you don't want to wait in line? I.E, are you actually arguing this based on economic principles and defending the freedom of a business to adjust price based on supply/demand, or is this just unreflective selfishness?

[probligo]

Hmm, I wonder what the reaction will be when the price is 30% higher than now...

News this morning is predicting USD100 per barrel, currently USD72.

[Amy]

What about people driving to work? People driving to school?

[Scott S]

What about them - do the principles of economics get suspended for soccer moms? Trying to play with the market price leads to shortages (imagine the government dictating that Gucchi bags cannot be over $20). So you can either pay whatever the market will bear, or you can pay less - so long as you wait until your assigned day during the week and wait in line for an hour, and then maybe there will be some left. It's not like you have to look far back in history either.
If you really want some gas relief, ask your congressman to sponsor a bill to temporarily repeal the federal gas tax - and then get your local rep to do the same for state tax. In NY alone that would chop about 50 cents off every gallon. But of course you can't ask a thief to take a vacation.

[Half Sigma]

"What about people driving to work? People driving to school?"

They could carpool. Or take the bus.

[Randy Gordon]

Assuming, of course, that there is a carpool or bus available. Generally speaking, there isn't, except in big cities and their suburbs.
...
I have to admit, as an amateur economist, I find your reasoning interesting. You discuss price inflation by regulatory forces artificially altering the supply/demand curve.

However, the thesis is price deflation by regulatory forces in response to price inflation by market forces that are artificially altering the supply demand curve.

This sort of manipulation by regulators is a property of every market since prehistoric times, and is usualy justified by the fact that the regulators represent the host governments interests in allowing the market to exist.

So one would haveto either conclude that you are arguing against regulation of the markets, or that you wish to "privatize" regulatory responsibilities.

It is hard to see how either approach would not significantly decrease faith in the markets, or protect the interests of the markets host governments.

Which leads me to ask, if you adopt your approach, how would you protect against manipulation of the markets artificially altering the economy of the host government, ala Worldcom, Enron or any of the other text book examples of regulatory intervention?

[William]

Wow, someone who can justify government intervention in economics talk. Thanks, I've gotta remeber this, randy. And on the note that the host government should look out for its own interests, that's exactly the justification for the government playing an aggressive part in eliminating oil consumption, unless you think it's healthy for the US to account for 1/4 the world's oil consumption.

HS, it's kinda silly to say people shouldn't worry about matters like gas prices when NO is in such a fix because the reasoning just doesn't stand up in the larger world. For instance, how dare you concern yourself with gov. smoking regulations when a quarter of Bangladesh gets flooded yearly? or all those millions in Africa are dying of aids and suffering under inept governments?

You concern yourself because you've got to look out for your own well being, which, although it is tied to society's well being, is no logical reason for abandoning your own life in worry about another's.

[Randy Gordon]

I would reply to that, but frankly, I am a little confused. I don't care at all about any country but America.

Anyhow, I was just quoting standard "new institutional economics" and the theory of regulation and contracts.

Which brings me to my point. American society, through its elected representatives, has decided that consuming 1/4 of the worlds oil is healthy, otherwise the elected representatives would have curtailed that practice by the mechanisms suggested.

It is not up to me or you to insist they do otherwise, American society contains fully functioning mechanisms to reflect even a strong minorities opinions on social goals. We have had large numbers of examples of that in the past century, including, of course, temperance and abortion.

[William]

"It is not up to me or you to insist they do otherwise"
You bet it is. Those fully operating mechanisms consist of you or me going out and discussing stuff with other people, coming to conclusions, and spreading those conclusions. Unless you can actually prove that massive oil consumption is indeed a healthy habit, I'm not going to buy, "it's alright because everybody else does it."