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Statist Claptrap on the Gas Lines

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For an excellent example of the economic ignorance that pervades the mainstream press, take a look at these two articles: “Behind New York Gas Lines, Warnings and Crossed Fingers” by David W. Chen, Winnie Hu, and Clifford Krauss and “Around Odd-Even License Plate Rules, a History of Impatience” by James Barron.

The articles address the long lines at gasoline stations in New York in the wake of Hurricane Sandy. What makes the articles so astounding is that as one reads through them, it becomes obvious that all of the authors are totally ignorant of the true cause of the gas lines.

Here’s the lead paragraph from the first article:

The return of 1970s-era gas lines to the five boroughs of New York City was not the result of a single miscalculation, but a combination of missed opportunities, ignored warnings and a lack of decisiveness by city and state officials that produced a deepening crisis and a sense of frustration.

The article then proceeds to explain how New York officials dallied over whether to implement a rationing plan, as New Jersey had already done. In an implicit dig at the “free market,” the authors of the first article state, “These officials seemed to cross their fingers that somehow the gas supply would improve and that they would be able to avoid resurrecting unpleasant memories of the 1970s.”

The authors also alluded to “panic buying and hoarding” as contributing causes of the long lines. On the supply side, they blamed the problem on damage to a refinery and to several gas terminals.

Lest you have any doubts about the ideological perspective of the authors, consider this line from the first article: “Compounding the problem was the lack of a centralized way for officials to coordinate with counterparts in the region’s complicated fuel-distribution network….”

In other words, what was needed to solve the problem of those long gas lines was central planning, with the plan to include a rationing system. You know, just like in the old Soviet Union! You remember that system, right? You remember how well central planning worked there, right? You remember the rations there, right? You remember the perpetually long lines there, right?

Ultimately, New York officials did impose a rationing system, one that permitted people to get gas on certain days depending on the last digit of their license plates.

The second article compared the long gas lines to those in the 1970s. The author of that article blames the shortage of gas on the fact that “the storm forced tankers bound for the New York area to wait it out…” and to the fact that the storm cut off electricity to gas stations. The author then proceeds to describe the long gas lines in the 1970s, blaming them on the Arab oil embargo in 1973 and the Iranian revolution in 1979, which he says set off “panic buying and long lines at gasoline stations.”

As any libertarian or Austrian economist will tell you, all this is just sheer nonsense. But like I say, it’s classic statist. Despite all the writings that libertarians and Austrians have published on this subject over the years, the statist mindset simply cannot process it or even allude to it.

Consider these two articles:

New York Investigates Price Gouging Post-Sandy” by James O’Toole at CNN Money.

N.J. Sues Gas Stations, Hotel for Post-Sandy Gouging” by David Voreacos at Bloomberg.

Now, I’d be willing to bet that those four New York Times authors are familiar with these price-gouging legal actions. But what is painfully obvious is that none of the four is able to tie the two things together!

The reason for those long post-Sandy gas lines was not the “free market,” or “panic buying,” or a reduction in supply, or the failure of public officials to implement a good central plan, or their delay in imposing a rationing system.

The reason for those long gas lines was very simple: Price controls, both today and in the 1970s! Those anti-gouging laws are a form of price control. They make it illegal for the free market to operate. Remember: the term “free market” does not mean that things are given away — as in the common use of the word “free.” It means a market that is free of government control or regulation.

Thus, it’s obvious that when the state makes it illegal for owners of gasoline (or anything else) to charge whatever they want, that is not a “free market.” That is a controlled or regulated or managed market.

The worst thing that public officials can do in a hurricane or other disaster is impose price controls (or anti-gouging laws). Prices are nothing more than the free market’s intricate messaging system. When a disaster occurs, the price of gasoline soars, owing to skyrocketing demand and drastically reduced supply.

The soaring price tells consumers to conserve. It also tells suppliers to supply. So, people cut back. They’re more careful about how they use gasoline because it’s so expensive. At the same time, entrepreneurs, attracted by the extraordinarily high profits they can make, figure out ways to get gasoline to consumers. Gradually, the price starts to drop.

When public officials intervene with their price-gouging laws, they disrupt the free market’s intricate messaging system. By artificially keeping prices down, they ensure that consumers will continue using available stocks of gasoline as if nothing has happened. And they destroy the financial incentive of entrepreneurs to rush more stocks of gasoline to the affected areas.

What’s most astounding about all this is that it’s only libertarians who see the moral abomination that is involved with price controls. The gasoline doesn’t belong to the states of New York or New Jersey. It doesn’t belong to society. It doesn’t belong to consumers. It belongs to the owners of the gasoline. An owner of something has the right to sell it at any price he wants. It’s his property! By the same token, consumers have the right to walk away.

Why can’t statists see this? Why do they turn to methods that were embraced by Soviet officials rather than the free market? Because the last thing any statist is going to do is even hint that the state is responsible for the problem. We saw that during the Great Depression, which was caused by the Federal Reserve but blamed on “the failure of free enterprise.” We’re seeing it now in New York. To the statists, the government is god. To them, the state is always the solution, not the source, of the problem.

Fortunately, there is one segment of society that knows better and doesn’t fall for the statist claptrap. That’s, of course, the libertarians.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.