In a free market economy, the regulating factor is the price.It is the price which determines the amount of goods that will be supplied. It is the slope of the demand curve (elasticity) which predicts the effect. If substitution allows people to change their habits, the demand curve will be much less steep. [paraphased from the Wealth of Nations} In a free economy all people have the freedom to choose how they will spend their paychecks. Unfortunately if the government steps in to 'prevent gouging' the supply will dry up. As suppliers find that they cannot compete at the controlled price, they close down. During a regional weather event, the best thing to do is leave the car parked. If travel is reduced, or the public transit option is excercised, there are savings to be made. During the seventies at a time of high inflation, I think it was Willy Brandt, in Germany that pointed out if wage and price controls were to be introduced, the most likely result would be a black market. It was exactly that which lead to the demise of the Soviet Union. Many of the factory managers arranged for necessary goods to disappear, to be sold at higher prices than the official government price. the only way to avoid that situation is to ration the commodity,, and in the case of the USSR, that also failed.
On Sep 22, 5:39 am, Gaar <[EMAIL PROTECTED]> wrote: > So when they don't raise prices during shortages, they are being > irresponsible. > > But when they do raise prices during such things, then they are > gouging... > > They can't Win for Losing. > > On Sep 21, 9:30 pm, "M.A. Johnson" <[EMAIL PROTECTED]> wrote: > > > > > The Truth About Gasoline Shortagesby Gary North > > On Saturday afternoon, September 20, my daughter, who lives in Nashville, > > called my wife, who was visiting in Atlanta. She knew that my wife had > > planned to return to the Memphis area by way of Nashville. She told my wife > > to be sure to fill up her gas tank in Atlanta, because there was a major > > gasoline shortage in Nashville. > > My wife went out to fill her gas tank, and she found that she could not > > find a gas station with gas for sale. She called me to warn me. I > > immediately went to the local gas station. They had no premium gas, but > > they did have unleaded regular. I filled up my tank. > > I came home and did a search on the web, and I found a story about the > > shortage in Nashville. The story said that a rumor of an imminent shortage > > had swept Nashville, and people lined up their cars to fill up their tanks. > > My daughter said that she had been in a long line herself. She was able to > > fill her gas tank, but shortly thereafter, the gasoline station manager > > placed "empty" signs on the pumps. > > Here we have a classic example of rationing by lining up. A week before, > > there had been a regional gasoline shortage as a result of fears regarding > > Hurricane Ike and the possibility that gasoline refineries in Texas would > > be shut down for months. Some gas stations raised prices, but others > > refused. The ones that refused ran out of gas. People sat in their cars for > > half an hour or longer in the hope of getting to a pump, and filled up > > their tanks. > > Before the weekend was over, President Bush went on national television and > > warned against gasoline stations that gouged consumers. He said that there > > would be an investigation regarding accusations of gasoline stations that > > raised prices on Friday. > > The message got through this weekend. Instead of raising prices, in an > > attempt to reduce demand for gasoline, thereby allocating gasoline that was > > in short supply by means of price, station managers simply let people fill > > up their tanks until the pumps were empty. Anyone who wanted gasoline after > > that was out of luck. > > This is rationing by lining up. It is the alternative to rationing by > > price. Rationing by lining up creates no financial incentive for suppliers > > of the item in short supply to allocate new supplies to the region of the > > country which is experiencing a shortage. Instead, delivery schedules > > remain the same as they did prior to the shortage. This continues the > > shortage. > > Whenever there are complaints about price gouging during a period of a > > shortage, sellers get the message. The next time there is a shortage, they > > hesitate to raise prices. They shift to the other allocation system: first > > come, first served. This subsidizes people who have a low value on their > > time. People who place a high value on their time prefer to pay extra money > > in order to attain their goals. But this is made illegal by the state. So, > > the shortage lasts longer than it would otherwise have lasted. > > The official goal of the government is to make certain that everyone has > > access to the item in short supply. The government says that raising prices > > during a shortage is unfair. So, the result is the opposite of what the > > government's official justification was for holding prices down. There is > > an even greater shortage, because people buy more of the item than they > > need immediately. They have no incentive to reduce their consumption, > > thereby making available applies to those who were at the end of the line. > > There is no incentive for anyone at the front of the line to refrain from > > filling his gasoline tank. So, gasoline runs out before the line runs out. > > This happens with regularity. All it takes is a rumor to create massive > > demand for the item that is believed to be in short supply. There is no > > pricing arrangement that alerts people to the crisis. Instead, long lines > > appear in the front of gasoline stations. As soon as the long lines appear, > > people panic, and line up to get gasoline even though they do not have > > empty tanks. This is exactly what I did as soon as I heard about the > > shortage. I had half a tank, but I went to my local gasoline station and > > filled up. I found that there was no premium gasoline available. That was > > not a problem, since I use unleaded regular. But I did note that there was > > a shortage of premium, and this encouraged me to fill up my tank. > > The public refuses to learn. The public is incensed against people who > > raise prices in a crisis, that is, people who respond to increasing demand > > by large numbers of buyers. The critics do not like the principle of the > > auction: high bid wins. The critics prefer another principle: first come, > > first served. The second principle offers no incentives for suppliers to > > increase production. > > Once again, we learn that the free-market principles of open competition > > and high bid wins cannot be thwarted without negative > > repercussions.http://www.lewrockwell.com/north/north655.html- Hide quoted > > text - > > - Show quoted text - --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
