Why People Don't Trust The Market

John Stossel put that in the form of a question the other day, and then did a fine job of answering it:

The damage from hurricanes Rita and Katrina will send gas prices through the roof and destroy the economy!

"It's inevitable that this is just the beginning, it's not the end, of this gasoline crisis!" Senator Charles Schumer told me, as Rita approached last Friday. The New York Democrat went on to say that we're "twiddling our thumbs while Rome burns ... we are weakened in every way!"

Ah, yes, the perfect demagogue. Tub-thump a crisis where none exists on a topic about which most people know very little, and then stampede the public toward a "solution" that would generate the very crisis you claim to solve.

Sure enough, Chucky didn't disappoint:

He is eager to spend your money to cure his panic. Schumer wants a new "Manhattan Project" that would use huge amounts of your money to fund "independent energy sources." I reminded him that the last time government tried that, it wasted billions on the totally failed synfuels project. Schumer said that was a failure because "political leaders" chose synfuels, but this time Congress would have "non-politicians" decide what projects to fund.

Sure they would.

If non-politicians are going to decide what projects to fund, why do we need Chuck Schumer? We already have a system in which non-politicians decide what projects to fund.

It's called "the market."

God bless John Stossel. I hope he gets hired soon as a GOP media consultant, because this is the message upon which the majority needs to be expounding relentlessly.

Perhaps if they did, accusations of "gouging" would get laughed out of the public square, as they deserve to be:

Rather than "gouging" members of the public, gas station owners are actually helping them by raising prices. This may seem counter-intuitive, but we have to consider how supply, demand and price interact. Normally, supply and demand dictate price, as is the case when gas prices spike. When price, however, is fixed, as would be the case if an "anti-gouging" law was in effect, then demand will outstrip the supply available. Shortage is the inevitable result. Gas would be rationed in some way, whether it is by some arbitrary legal fiat or by long lines at the pump. A black market is also more likely.

Moreover, as experience with rent control has shown, capping prices in times of scarcity also has the perverse effect of reducing the quantity of the good or service supplied. In other words, capping gas prices would actually lead to less gas being sold, as suppliers reduce the amount they are willing to sell in order to avoid loss. Shortages are therefore exacerbated. By contrast, anyone who tries "gouging" will find themselves with unsold supply and will be forced to lower their prices to offload it. [emphasis added]

The moral of this story? "Gouging" and the "economic populism" from which the charge is spawned are just loud-mouthed ignorance. Predation upon the real or imagined distress of the masses. Indeed, it is the selling of misery and scapegoatery, a more potent, and despicable, "bundling" than Microsofties ever dreamed of. It gets over because prices, especially of basics like groceries and gasoline, are very visible while the information and industry-specific arcana that goes into their determination are not.

Some pols who should know better get bulldozed into aping this irresponsible hysteria:

[T]here is an unfortunate tendency in the free-market community to buy into the alarmist rhetoric that suggests "gouging" does go on. When the President declared on September 1st that he would take a zero-tolerance approach to price-gouging, he unwittingly perpetuated a myth. Buying into the rhetoric of gouging validates what Prof. David Henderson calls "do-it-yourself economics." Worse than that, however, it victimizes responsible suppliers who are doing their best to ensure the maximization of supply. [emphasis added]

That victimization is the objective if pols who don't know better, or even worse, do but want suppliers framed and screwed anyway in order to grow their own power over the market they do not trust.

The moral of THAT story is, "Chucky Schumer gives me gas." Which he'd have to, because I doubt anybody would buy it from him.

Pity his "sinfools" scheme won't meet the same fate.