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Jesse Gordon on Budget & Economy

Editor-in-chief, OnTheIssues.org


A “shortage” always means government price fixing

Whenever you hear the word “shortage,” you can be assured that it really means “government price fixing,” and in particular that the enforced price is below the market price. A “teacher shortage?” That’s because the government sets teacher salaries too low. An “energy shortage?” Look closely and somewhere along the supply line you’ll find a government-enforced price, which companies would have to go bankrupt if they tried to meet it.

Politicians always pretend that the problem isn’t with government. Politicians blamed the great oil shortages of the 1970s on OPEC. But the truth is, we waited on gas lines because the government wouldn’t let us pay the real price of gas.

But in a free market, shortages are always met just one way - by increasing the price until supply meets demand. That’s one of the basic tenets of economics, and politicians would do well to learn it. If the government prevents prices from rising, yes, shortages will always ensue.

Source: America Asks About Politics, issues2001.org/AskMe , Feb 25, 2001

Cal. energy: let prices rise, and crisis will disappear

The current “crisis” with California energy prices, many politicians say, indicates a failure of electricity deregulation. That’s simply untrue - it means energy prices were not fully deregulated at all. In their “deregulation,” California allowed suppliers from anywhere, but required that they meet prices that the state determined. The “crisis” came about because the cost of supplying electricity exceeded the allowed price. The solution is to deregulate prices - that would end the “crisis” in a very short time.

Yes, the poor would be hurt by rising oil & gas prices. The way to deal with that is to implement programs to help the poor. For example, there’s a federal program called LIHEAP which pays for heating oil for low-income people. That program could be replicated for paying for electricity. Helping out the poor shouldn’t require the rest of us to live in a constant energy crisis.

Source: America Asks About Politics, issues2001.org/AskMe , Feb 25, 2001

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Page last updated: Jul 04, 2014