Bryan, Read Thyself
By Arnold Kling
I can’t believe that Bryan wrote about people getting upset about high gas prices without mentioning anti-market bias. This is the perfect example of the public thinking that high prices are due to an outbreak of excess greed (profits are up! must be due to greed!).
Bryan, I’ve got a recommendation for you. Read this book!
UPDATE: For some chilling illustrations of anti-market bias, see this transcript from Sunday’s “Meet the Press.” Note the poll results on page 1, the pathetic interchange on the bottom of page 3, and Dick Durbin on page 4. Durbin says that if oil prices go up, and oil is an input to gasoline, then oil company profits have to go down. That would make sense if oil companies didn’t own any, er, oil.
If I were Energy Secretary, and I were asked the question about “who is responsible” for high gasoline prices, here is how I would answer:
It’s not really an issue of personal responsibility. You could try to blame the gas stations. After all, every gas station owner has the discretion to set the price at whatever level he or she wants. But suppose you owned a gas station and you decided tomorrow to cut the price by 25 cents a gallon. The first thing that would happen is that people would flock to your station, and you would sell all your gas. Then, you went out to buy gas to refill the pumps, you would find that the cost is higher than what you are selling it for. So everybody in the market, from consumers to gas station owners to oil company presidents, is subject to supply and demand.
If you’re a homeowner, who do you think is responsible for the big increase that has taken place in the price of your home in the past five years? Do you think you colluded with other homeowners? Is there price-gouging going on?
The point is that supply and demand is easy to understand if you’re a homeowner. But for some reason people don’t get the concept when it comes to gasoline.