10/28/2005

Government Stepping In.

In this article, I was happy to hear that our government is finally trying to help out the citizens of this country with the current gas prices. Price gouging is a problem all over the country, and finally those who try to benefit themselves while hurting those around them will be stopped. Currently, democrats are proposing new ideas to stop these efforts and help us as citizens when we really need it. It is good to finally see the government step in and take charge on important issues like this.

4 comments:

Connor said...

What a relief it is when our own government lends us a helping hand. The recent drop in fuel prices has been a great help on my budget. Is the government stepping in in order to gain more support from the country as a whole? With the war and all the negative impacts that are coming with it, the government needs to perform as many kind acts for its citizens as it can in order to boost its level of support.

Logan said...

It sure feels nice in the short-run, but what will it feel like in the long-run. Remember, when the government begins to stick its hands into the economy, long-run effects can be devastating, especially if driven by democratic politicians. Democrats seem to always seek for cosmic justice. Cosmic justice is unattainable in this life, and in seeking for it, future generations will be hurt. Letting the market run its course on its own is always the best policy. Price gougers will eventually meet their demise and the economy will be better off. Its simple, the less government interaction the better the economy!

Alex said...

I know we should be looking at the long-run as Logan said, but when it comes to gas prices and saving money everyone is just looking at how it affects them today. With that said, I think it's great that the Government is stepping in and helping. I'm from a small town, and the prices are still sky high. No one wants to bring them down, because they like the revenue it's bringing in. Hopefully the Government will help out my little home town as well.

Dr. Tufte said...

-1 on Logan's comment for spelling errors.

Price gouging is something they just made up. I hope I can convince you of that before you get out of this class.

To see the reasoning you need to recognize that all of us have the ability to sell something like gas. The fact that we don't does not mean that we can't. Rather it means that no one would be interested in buying what we have to offer at the price we would need to charge.

How much would you charge your neighbor if they wanted to buy all the gas in the tank of your car, leaving you dry? Let's say $4 per gallon. I just made that number up, but part of the reason that something like this never comes up is that your neighbor knows your price would be too high to bother with.

Now let's look at the gas situation. Stations were selling gas for (say) $2 per gallon, while you were selling it for $4 per gallon. They were making sales and you weren't. Now they are charging (say) $3 per gallon, you're still charging $4 per gallon, and they're still outselling you.

The question you need to come to grips with is: in what sense are they gouging if they are beating the prices of just about everyone? What is it about the fact that they can sell at their chosen price that opens them up to accusations of gouging, while you and I are prepared to sell gas at prices that are nothing short of riduculous?

The sort of tortured logic required when we make the emotional appeal to people to be against "gouging" could just easily be used to accuse Bulloch Drug of price gouging because they charge more than Wal-Mart's pharmacy.

This sort of action on the part of the government is not beneficial. It's abusive.

Alex's point can be twisted even further. We know from elasticity that not all costs can be passed on to consumers. So even if prices doubled we wouldn't expect profits to double. But ... we would expect taxes raised from gasoline to double, because most of them are levied as percentages of wholesale prices. So, the real winners of the recent price up are governments, not oil companies.