What is going on in England? There are long lines at gas stations and motorists are not allowed to fill ‘er up; they are limited to only a few gallons of gasoline, each. The fuel pumps are in operation. The refineries there are functioning well. There are plenty of trucks fully capable of transmitting the fuel from wholesalers to retailers. The problem? You had better be sitting down for this or you’ll keel right over: there are simply not enough drivers available to transport the fuel to where it is most needed.

Say what? There are millions of motorists in that country. Of course, not that many are capable of driving the heavy tanker trucks; however, more than enough are! But, still, there is something rotten in Denmark, well, England. Either that, or what we teach in introductory economics is all wrong.

What is the lesson stemming from econ 101? It is that whenever there is a shortage, as there is now for English truck drivers, this means demand is greater than supply. And what is supposed to happen when that takes place? Prices, or in this case wages, which are the price of labor, are supposed to rise. These, in turn, are comprised of money payments, salary, plus working conditions. But neither has occurred. Working conditions, in the form of clean rest stops for long distance haulers, have actually deteriorated, and take-home pay has not increased.

Why not? Where is the money for these raises supposed to come from? They are presumed to emanate from the ultimate consumer in the form of derived demand from him. Well, there is indeed a shortage of drivers in England. Motorists are clamoring for more gas. There are long lineups at filling stations. Why haven’t prices risen there, so as to ration limited supply until more is forthcoming?

This ordinary economic response has been rejected, and for two reasons. One, it would be considered price gouging. And that would be unconscionable in these politically correct times. Second, if the price of gas doubled, tripled, or even quadrupled, who would still be able to purchase it, and who would be left out in the cold? This much is clearer: the rich would get the lion’s share, and the poor would pretty much have to do with their leavings, or do without. But we can’t have that, not in this epoch.

In the absence of government intervention, the price of gasoline would have risen. This would have financed higher wages and better working conditions for the drivers. End of problem. It never would have occurred in the first place. Any incipient tendency in this direction would have been nipped in the bud.

Market prices are a signal. If they are squelched, they cannot do their jobs. Economics chaos of the sort we now see in England results. Suppose we all decide we are too fat. We want to go on diets. We don’t desire as much ice cream, cake, cookies, and instead demand more carrots, apples, string beans. But the farmers, bakers, manufacturers have as yet no idea of our change in tastes. Do we have to petition the government to get entrepreneurs to produce more rabbit food and less of what makes life worth living? No. We simply buy more of the former and less of the latter. This raises the prices and profits in veggies and lowers it for sugary substances. Business is led by an “invisible hand” to do our bidding. This is despite the fact that some don’t like it since some get rich (low calorie food producers) and some suffer a loss (the producers of high calorie food). But if this market signal is not allowed to function, we stay obese.

There are analogous signals in numerous other walks of life. If your bridge partner opens with a one heart, he is signaling something different than a three diamonds bid. If these signals are disallowed, the game is ruined. The conductor of the orchestra also signals. He indicates he wants the music to go faster, slower, louder, softer, etc. If he is not allowed to gesture, wave his arms about, if his signals are truncated, the quality of the music is reduced. Words, too, whether spoken or written, are signals. So are musical scores, facial expressions and hand gestures. Communication depends upon signals. Most people appreciate all this, and would be horrified if they were rendered impotent. Temple of Babble, here we come.

But prices, too, are every bit as much a signal as any of these others. The only difference is that they are not at all generally appreciated. Rather, we tolerate rent controls, minimum wages and outlaw price “gouging.” All this at the loss of a civilized order. Who wants to wait on line for several hours for two gallons of gas at an artificially lower price?

Which was the chicken and which the egg in this case? It is unclear as to whether the low price and restrictions on quantity were the cause or the result of the problem. What is clear is that one way to ameliorate the problem is to allow market prices to operate. When they do, in a shortage, initially prices will rise. But that will attract greater supply, and prices will fall once again. Meanwhile, no shortages.


Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans