Supply and demand have been allowed
to work — at least in a limited way — in energy markets,
resulting in ups and downs in gasoline prices. Strong demand coupled with
regulatory supply restrictions that were worsened by several hurricanes
caused gasoline prices to go up. Then as hurricane-damaged refineries were
repaired, gas prices began to plummet.
There have been no significant
shortages, thanks to the absence of price controls, but Congress is working
diligently to put an end to that outcome. Urged on by an economically
ignorant public, Congress recently held one of its periodic Grand
Inquisitions of oil company executives to demand an answer to the question:
"How dare you profit from the American free enterprise system?"
Accusations of "price
gouging" — i.e. allowing market forces to set prices —
abound, as do calls for price controls. They aren't always called "price
controls," but some slick euphemism such as "anti-price-gouging legislation."
It's the same thing.
The case against price controls is
not merely an academic exercise, restricted to economics textbooks. There is
a four-thousand-year historical record of economic catastrophe after
catastrophe caused by price controls. This record is partly documented in an
excellent book entitled Forty Centuries of Wage and Price Controls by
Robert Schuettinger and Eamon
Butler, first published in 1979.
The authors begin by quoting
Jean-Philippe Levy, author of The Economic Life of the Ancient World,as
noting that in Egypt during the Third Century B.C. "there was a real
omnipresence of the state" in regulating grain production and
distribution. "[A]ll prices were fixed by fiat
at all levels." This "control took on frightening proportions.
There was a whole army of inspectors." Read more>>
