Encounters with Stupidity

According to NPR, the brainiacs in Hawai'i have done it: they've outlawed expensive gas! Now if they could only outlaw expensive food, housing, cars and clothing. Hey, why not just have the government decree that everything must be cheap? Better yet, let's make everything free! The problem with this idea is that it ignores reality. Gasoline is a consumer product. Products are created by companies (or individuals) in response to demand, and the price is set (ideally) by free trade balancing supply and demand. A government decree can force the price of a commodity lower, but the market will respond by producing less of the commodity. What will happen next in Hawai'i -- if this law is actually passed and enforced -- are fuel shortages. Suppliers will do everything they can to limit shipments of gas to Hawai'i. In a market when gasoline is a scarce commodity, why would any supplier sell it for 10 cents profit (if any) when they can sell it elsewhere for 25 cents profit per gallon? The same would happen if the US at large passed a similar law. What will happen after gas becomes scarce in Hawai'i? Most likely, the government will blame gas suppliers for being "selfish" and stingy (of course, they should be selfish... but that's a longer story). Then perhaps lawmakers will mandate quotas for the amount of fuel suppliers must provide. Now we have clearly entered the realm of statism, where the government is decreeing what commodities must be made available, and at what price and quantity. Of course, that doesn't work. People are not most productive when forced -- they are most productive when they are free to pursue their own ends and earn maximum profits for themselves. In fact, people are far, far less productive when forced (there are many blatant historical examples, Soviet Russia being the most obvious; many modern day African countries being the most pathetic). Eventually, complete government control of the economy is the result of this process. When this happens, most incentives are removed to produce anything. As profits fall, production will drop, and the government will try to force producers. Eventually they might take over the oil companies and try to run them themselves. Unfortunately, we know what happens in state-controlled economies. Without competition and the profit-motive, state-run companies invariably produce very little compared to private ones. The result: everything is more expensive, and individual right to property (free trade of his property) has been removed. In the end, government cannot force production, and it must not control prices -- not for practical reasons, but to protect the investments of individuals (property rights). We must have separation of Economy and State.

NEW! An excellent article on the subject of gasoline price controls.