The problem with high, outside fastballs is that you swing at them... you can't help yourself.
In a Wichita Eagle letter to the editor this weekend, a Wichitan writes:
"Gasoline should be selling for somewhere between 75 cents to $1.15 per gallon. Instead, people are paying more than $2 a gallon. Prices are climbing with no end in sight. High gasoline prices are the result of a failure by our government. Those Republicans and Democrats in power who make decisions have provided poor, weak and, in some cases, no leadership to solve this problem."
Astonishing.
This individual clearly believes that prices for things like gasoline are set by the government, and that government has been sleeping on the job.
In a market economy (even the approximation of one we live in), prices are not set, they are discovered, through a constant cooperative negotiation between buyers and sellers. If prices are high and rising, it suggests that buyers are competing with each other to bid product away from sellers.
The writer (somewhat incredulously given his lack of faith in government stewardship to date) concludes with:
"The time is now for our government decision makers to act to solve the high-gas-price problem."
I assume they must act now before prices fall back again all on their own...
Perhaps government should decree that gasoline can only sell for $1.15 per gallon or less. If prices are capped at $1.15 a gallon, what might happen? I suggest to you the following:
- Since the market presently values gasoline at a higher price right now, setting it arbitrarily lower will increase demand. It will discourage conservation of gasoline and encourage its use. People will want more than they would have at $2.00 per gallon.
- Although they won't pay the full price at the pump, they will pay in other ways... since suppliers will be losing money at the mandated price, availability of gasoline will start evaporating just as demand for it starts increasing.
- Lines will get longer (what's your time worth?). Some will use their savings on gasoline to pay others to wait in line for them. Black markets will arise as friends who know friends suggest they can get access to a gasoline dealer without a waiting line at a higher, illegal price.
In other words, the price cap will have created an artificial shortage of gasoline.
Prices are just messengers of reality -- shooting them doesn't get rid of the reality. Just the connection to it. You can't cool off the world by plunging your thermometer into an ice bucket. You can't solve high gasoline prices by mandating price ceilings.
With fearful words like 'Prices are rising with no end in sight', I wouldn't be surprised if this was one of our State or local politicians writing this letter to the Editor. Anyone who would call for even more third-party intervention in our economy is obviously either the benefactor or recipient of one or more social programs being sustained by our many levels of government. The only way I would want our State or Federal government to affect the current gas prices would be to reduce the taxes that make up nearly 20% of our total cost for a gallon of gasoline.
Posted by: John | 30 June 2005 at 02:13 PM