flinthills

Gas Prices ... Markets Work

Katrina's devestation has created the very real possibility for $3-$5 per gallon gasoline prices.   When this happens there will most certainly be an uproar.  The phrase "price gouging" will be on everyone's lips. 

So, dear reader and good citizen, it is imperative that you speak up when you hear it.  The market is at work, allocating scarce resources to their highest valued uses.  There is no better, fairer, or more efficient solution.

High prices will be a vital signal to all of us that gasoline is getting scarce -- so you'd better really need it, or else you should conserve.  No one -- not the President, not your Senator, nor anyone else --  can wave a wand and "poof" problem solved.  Gasoline is going to be tough to come by for a while. 

It's not "gouging" when prices are freely set by voluntarily contracting parties.  Absent collusion and other illegal acts, a price simply reflects the current state of supply and demand.  In times of abundence, suppliers compete with suppliers to offer product to consumers, driving prices lower.  In times of shortage, consumers compete with other consumers to buy from suppliers, driving prices higher in the process.  The resulting price, increasing or decreasing, is just a messenger -- shooting it doesn't get rid of the problem of scarcity any more than plunging a thermometer into an ice bucket makes a hot summer day cooler. 

But shooting the messenger definitely kills any connection to reality, which removes the essential knowledge and incentives for correct behavior.  Without prices and the mechanism of profits and losses, we lose the ability to efficiently coordinate solutions to complex problems.  People don't conserve, they don't get inspired to find alternatives and substitutes, they don't invest in fuels research or ways to improve the productivity of refining processes.  In short, disaster ensues. 

So speak up and present the sane perspective.  If players (suppliers or consumers) are behaving illegally, then fine - they deserve whatever they have coming.  But in times like this it is highly unlikely that this is the primary source of high prices...  Ockham's Razor says it's much more likely that the source of the trouble is scarcity.

Mises on Social Security

One response I often get in friendly banter regarding my position on getting rid of the social security system is that the average person can't be trusted to save on his or her own.  In part I agree, because I believe U.S. policy, legislation, etc. has created the very conditions that make it so...  a nanny state where the individuals are raised to be perpetual children.  So think about that...  Ludwig Von Mises, in Human Action, painted the picture of what this leads to:

"Whether such a system of social security is a good or bad policy is essentially a political problem.  One may try to justify it by declaring that the wage earners lack the insight and the moral strength to provide spontaneously for their own future.  But then it is not easy to silence the voices of those who ask whether it is not paradoxical to entrust the nation's welfare to the decisions of voters whom the law itself considers incapable of managing their own affairs; whether it is not absurd to make those people supreme in the conduct of government who are manifestly in need of a guardian to prevent them from spending their own income foolishly.  Is it reasonable to assign to wards the right to elect their guardians?  It is no accident that Germany, the country that inaugurated the social security system, was the cradle of both varieties of modern disparagement of democracy, the Marxian as well as the non-Marxian."

In other words, this position leads inevitably to totalitarian rule in one form (socialism) or another (fascism).  If you hold the position that people in general are too stupid or lack the will to provide for their own future in absence of government coercion, you might want to think about your response to this rather compelling, historically substantiated, and well reasoned argument...

On the other hand you could take the position that most people can manage their own lives just fine and allow everyone to live and let live regarding their preferences for savings v. spending, and live with the consequences of their decisions.  There will be some grasshoppers among the ants.  In cases where they were simply irresponsible or foolish, they make great examples for the rest of society as to what happens when you don't save for your retirement.

You can then craft policy for the small minority who are simply unable to care for themselves, provide for a future, etc.  The destitute will always be among us -- they require our care.  But we shouldn't impose policies that apply to this small group of unfortunates on the majority who are perfectly capable of living their own lives.  If we expect people to live like responsible adults, and our laws and social programs reflect that, then that's what we'll get: responsible adults.