In the September 2001 Freeman I wrote an open, tongue-in-cheek letter to H. Clinton and C. Schumer. My letter is below the fold.
Dear Senators Clinton and Schumer:
Having accepted a position on the economics faculty at George Mason University, I just moved from New York to Virginia. But until recently, you were my representatives in the world’s greatest deliberative body. I write to you now on a matter of maximum importance to me, to the Foundation for Economic Education, and, indeed, to all teachers and students of economics across the land.
I encourage you to follow your instincts and vote for price caps on energy. By doing so, you will promote a goal that I sincerely believe to be both righteous and timely—namely, enhancing the quality of economic education across America.
My colleagues and I toil year in and year out to impart economic understanding to young people. But it’s a struggle. With all of the competition today for students’ attention—gazillions of cool Web sites, scores of cable-TV channels, dozens of fascinating opportunities to protest in interesting towns such as Seattle, Davos, and Quebec City—we economics teachers find it increasingly difficult to grab and keep our students’ attention. And the students don’t know what they’re missing.
“How is this stuff relevant?” they ask us. “What do your supply-and-demand graphs and your stories about opportunity cost and the role of prices have to do with anything that we care about? That’s all dull textbook theory.”
Of course, not all students dismiss economics as irrelevant or dull. But a renewed national commitment to price ceilings will be such a dynamo at re-energizing economic instruction that the number of students who come to appreciate the relevance of economics will increase probably 20- or 30-fold.
I speak from personal experience, having had the good fortune of growing up amid the numerous energy shortages of the 1970s. Back then, of course, I didn’t regard these shortages as good fortune, but I realize now that they were in fact a tremendous boon to me.
I got my first driver’s license in September 1973, just in time for the November 1973 gasoline shortage. Rather than carefree cruising with my girlfriend—as I’d imagined on the day I got my license—my time behind the wheel was spent mostly in a car parked in a line, waiting impatiently for the opportunity to buy a maximum of five gallons of gasoline. No fun.
Three years later, in early January 1977, I heard a tragic news report about an elderly couple in Buffalo who froze to death in their home because of the natural-gas shortage.
At first, I accepted the popular myth that these shortages resulted from some combination of greed, monopoly power possessed by energy suppliers, and an irreversible depletion of the world’s supply of petroleum and natural gas.
Just a few days after hearing about the couple in Buffalo, however, my understanding radically changed. My Economics 101 professor drew a supply-and-demand graph on the chalkboard and explained how the interactions between buyers and sellers cause markets to clear—how prices coordinate supply and demand not through the design or dictate of government functionaries but rather through the voluntary adjustments of countless individual market participants.
This story made some sense, but it didn’t much grab me until . . . until the professor showed what happens when government imposes price ceilings.
I remember the moment as if it were yesterday. “When government sets the price below the market-clearing level,” my professor explained as she pointed to the supply-and-demand curves on the board, “the amount that buyers seek to buy exceeds the amount that sellers make available for sale. The inevitable outcome is a shortage.”
Then and there I fell into my lifelong love of economics. Within a few weeks I decided not to drop out of school but instead to earn a doctorate in this incredibly relevant and illuminating subject.
But would economics have grabbed me so forcefully had I not waited in interminable lines at gasoline stations? Would economics have spoken to me so convincingly had I not been moved by the report of an elderly couple dying because of the natural-gas shortage?
Probably not. It was the evidence of the laws of economics cascading all around me that breathed life and relevance into the theories and diagrams.
I’m Not Unique
And other students were like me. When I first began teaching economics in 1982, I reminded my students of the long gasoline lines of 1973 and 1979. All heads shook knowingly. I had an easy time grabbing these students’ attention in my classroom because economics explained so convincingly why they suffered those long lines.
But by then President Reagan had ruined things. In 1981 he abolished price controls on oil and gas. Shortages ended. The intervening two decades of freer energy markets have robbed students of firsthand experience with the ill consequences of government price caps on energy. Even OPEC was forgotten. (A couple of years ago, a student I encountered speculated aloud that OPEC was a defunct video game popular in the early ’80s, “sorta like Pong.”) Because today’s students have no memory of the gasoline lines and other absurd aggravations of the 1970s, they too easily misperceive economics as irrelevant.
This is where you can help. Impose price ceilings on energy! Sure, there will be long lines at gasoline pumps and even more blackouts as consumer demand for low-price energy outstrips supply. Sure, the full cost of energy will rise because waiting in lines and dealing with blackouts devour valuable time and effort. Sure, these shortages will spawn black markets favoring the rich and the politically connected. Sure, price ceilings will severely discourage investments in generating capacity, in exploration, and in the development of other energy sources. And sure, some people may even die because there is insufficient energy to heat or cool their homes. But first things first: beleaguered economics professors will once again be able to point to a reality that makes economics relevant and interesting.
I urge you to cap energy prices. By doing so you will promote the worthy cause of economic education.