The Reality Reflected by Prices

by Don Boudreaux on June 2, 2007

Here’s a letter that I sent last week to the Washington Post:

To the Editor:

Kings
of yore occasionally killed messengers bringing bad news. By voting to
outlaw so-called "price gouging," the House of Representatives proves
that its members are just as irrational as these ancient monarchs
("Tipping-Point Shock," May 24).

Higher prices report an
underlying reality such as constrained refining capacity, rising
demand, higher taxes, and more regulations. Statutes that prevent
prices from rising do nothing to improve the underlying reality.
Indeed, by silencing information about reality, restraints on price
hikes keep consumers and producers acting in ignorance – thus making
matters worse.

Sincerely,
Donald J. Boudreaux

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Methinks

Dug,

You haven't dug far enough. I've never been to more polluted hell-holes than socialist and communist countries. Monopoly production and government control insures that there is nobody to sue, no responsibility to the population and no alternative for the consumer. They are by far THE most polluted places on earth.

Keep digging on Erin Brokovich too. The junk science she and Masry used to win the case doesn't mean that PG&E's dumping actually caused ANY of the ailments she claimed it did. The movie is a true story but the story of how lacking the suit was in actual scientific evidence somehow didn't make it into the movie. Here's a link to but ONE article about the junk science in her lawsuits - including the one that made her famous: http://tinyurl.com/2w3lh7</p>
Pollution exists because it is the natural outcome of doing anything. The worst pollution is perpetuated by government . No accountability, you see.

ben

Dug

Keep digging brother. Let me assure you pollution is not limited to capitalism. Far from it. You'll notice that virtually all kinds of pollution are declining in western democracies now that they are wealthy enough to care about the environment.

Dug

Fundamental assumption is wrong, incomplete at best. Add to it factors such as

5.) extortion - the ability to create an inflated scenario whereby to profit from it

6.) monopoly - the ability to act without fear of competition or regulation

7.) greed/power - need for self-preservation

8.) no system of checks and balances

9.) other hidden biases or secret agrendas (my brother's cousin's rule)

The government represents the people. The people require government to act in an orderly fashion to redress greivances and live in a civilized society. However, less is more. The less government the better. However, that does not mean that important fuctions such as the FDA, the EPA and others should be ussurped or marginalized. An industry that is unregulated becomes a big poluter. There are numerous examples even right here in Albany on a major stretch of Central Ave where they used to manufacture "tank-killer" bullets. It is a toxic waste site. Then there's Love canal, that movie Erin Brokovich is based on a true tale... point is, polution exists only in the state of mind of a capitalist because in nature there is no such thing.

Polution exists because the left overs of capitalism have no value to it. You cannot profit from toxic waste so you dump it in the river. Look at the PCBs in the Hudson River and the incredible difficulty it has been to clean it up.

Robert Speirs

So hybrids should be subsidized with money taken at the point of a gun from other people why exactly? And this in comments to a blog post about prices as signals of economic worth!

muckdog

I think we've seen that Americans aren't even flinching at gas prices right now. Maybe some have cut back on Starbucks trips or have cut down on driving a bit to compensate. And that's what we'll do if prices go higher.

My next car will be hybrid. I think many are making that decision, too.

True_liberal

I'm not sure how much "fair trade" law invades retail pricing today - but if a manufacturer/distributor specified a MINIMUM price for his goods, a retailer could be prosecuted for advertising BELOW that price.

Quite the opposite effect from "anti-gouging" law, but equally good at obscuring the reality of the price/supply/demand relationship.

And re gas pricing - anyone who has the notion that US gasoline is expensive can instantly disabuse himself of that fallacy by visiting any of dozens of other countries (notably European, etc.), to see our prices are HALF what they pay.

Tiger

Stepping the wrong direction here. A better move would be to investigate and undo any and all impediments to lower and more competitive pricing including lowering gasoline taxes, undoing restrictions on exploration and refinery construction, removing tariffs and other barriers to imports, allowing nuclear plants to be immediately built in mass (to reduce demand on petroleum fuels) and giving serious incentives for the purchase of non-petroleum cars, specifically those that run on electricity-say in the neighborhood of a $20,000 straight deduction on income taxes. Can you say $1.00 per gallon??

Brad Hutchings

How much of a stretch would it be to try to equate pricing with speech? Both intellectually and legally...

B Holmes

Far too few understand price as a knowledge surrogate conveying invaluable information about supply and demand realities. Legislation like this only makes the problem worse by manipulating price even further from such market realities.