Friday, June 15, 2007

What happens when you elect a Democratic majority

And you also have 56 Republicans also chiming in with their... ignorance... including usually friendly Kentucky Republican Ed Whitfield voting for H.R. 1252 in an attempt to criminalize "price gouger" gas station owners. (I hope a Whitfield staffer finds this post via Google and knows how unhappy I am with their boss). And of course, Chet Edwards did too. At least the President is going to veto it.

Here is a Mankiw post on why this bill is a bad idea.

Basically, it goes like this:
Suppose you're a gas station owner and a hurricane hits near your area, and all of a sudden it's $2/gallon more expensive to get a tanker truck of gasoline. Common sense dictates you have to raise your prices by $2, but then you risk getting arrested for "price-gouging."

You rely on people buying lottery tickets and slurpees to make profit. Knowing it might be a while before you're able to get another shipment of gasoline, you might raise your prices by a good amount, insuring that fewer people buy your gasoline so that you have enough to last
until the next shipment and you're able to keep your store open to sell slurpees to those who do stop for gas. This also runs a risk of you being arrested for "price-gouging." If you don't raise your prices not only will you be losing money, but there will be long lines and you'll run out of gas by the end of the day.

One of my favorite Milton Friedman quotes is that the "price-gouging" gas station owners in these situations should "all be given medals," for doing the right thing.
It's like I tell my students, most politicians have never had even a basic economics class and can't read a supply/demand schedule. They legislate purely out of populist sentiment.

In a related story, Joni and I aspire to live in Estonia.


JTapp said...

FYI- A Chet Edwards in staffer in D.C. found this post via Technocrati on Friday.
I'm glad SOMEONE in D.C. knows I'm upset!

Ryan said...

Chet is an Aggie and I don't vote for him!! I think that really speaks volumes!

Ryan said...

ANd ohhh yeah...
to the Chet office:

JTapp said...

Haha, yeah! Turn up the heat!