Soccer Dad

Eight governors demonstrate that they're economically illiterate

Governors Seek Gas Price Gouging Probe:

Eight Democratic governors asked President Bush and congressional leaders on Tuesday to investigate possible gasoline price gouging in the aftermath of Hurricane Katrina.

In a letter, the governors urged an investigation into "excessive profits being made by oil companies who are taking advantage of this national crisis."

The letter was signed by the governors of Oregon, Wisconsin, Michigan, Illinois, New Mexico, Iowa, Montana and Washington. It also urged Congress to refund any excessive profits to consumers.

To answer those charges Todd Zwyicki of the Volokh Conspiracy brings Walter Williams to explain:

The fallout from Hurricane Katrina has featured a lot of ignorance and demagoguery about prices. Let's look at some of it. One undeniable fact is that the hurricane disaster changed scarcity conditions. There are fewer stores, fewer units of housing, less gasoline and a shortage of many other goods and services used daily. Rising prices not only manifest these changed scarcity conditions, they help us cope, adjust and get us on the road to recovery.

Here's a which-is-better question for you. Suppose a hotel room rented for $79 a night prior to Hurricane Katrina's devastation. Based on that price, an evacuating family of four might rent two adjoining rooms. When they arrive at the hotel, they find the rooms rent for $200; they decide to make do with one room. In my book, that's wonderful. The family voluntarily opted to make a room available for another family who had to evacuate or whose home was destroyed. Demagogues will call this price-gouging, but I ask you, which is preferable: a room available at $200 or a room unavailable at $79? Rising prices get people to voluntarily economize on goods and services rendered scarcer by the disaster.

In the case of the governors of Oregon and Washington the demogoguery is particularly galling. Why? Because those two state governments are so addicted to gas taxes they are considering penalizing people for getting hybrid vehicles by charging a mileage tax in addition to a gas tax! Talk about gouging.

Posted by SoccerDad at September 21, 2005 3:11 AM