fun fact: there is no idea so stupid that humans will not try it again (price controls edition)
welcome back to the 70's
love them or hate them, the days of disco are justly remembered for their fashion and for their music.
these were some good times…
but we need to be cognizant of the other parts.
the 70’s were also a time of truly awful monetary management and deeply deluded regulatory overreach.
among such wonders were price controls as an attempt to rein in inflation. nixon literally tried to freeze wages. it was a hilarity of failure and debacle, because in the war of diktat vs supply and demand, supply and demand is undefeated.
if you mandate a price higher than market, demand collapses.
if you mandate a price lower than market, supply dries up.
this “rocks are hard, water is wet” levels of basic understanding.
the simple fact is this: in a free market, the cure for high prices is high prices.
this reality is no more optional today than in the era of ABBA.
prices are potent catalysts. they are the signal that elicits response to produce more goods and services and to find substitutes and alternatives to them. high prices attract investment and drive adaptation. it’s simple and it’s enduring. it’s what makes markets run and left alone, it takes care of itself.
when you interfere with prices, it breaks this virtuous cycle and thereby breaks markets. you get gluts, shortages, rationing, and all manner of price transference such as paying in time rather than money. ask anyone who sat in 70’s gas lines or who tried to get an MRI in canada.
this is time tested and bog simple.
and yet no one understands.
because here we go again.
Pedro Sánchez @sanchezcastejonMañana aprobamos en #CMin el tope al precio del gas que se usa para producir electricidad, reduciendo así el recibo que pagan familias y empresas. Será un tope de 40€ y el mecanismo tendrá vigencia un año, asegurando la protección de la ciudadanía ante futuras subidas de precios https://t.co/Jk9PGQS3ZX
enjoy your shortage.
not content to see the europeans have all the fun, the US is gearing up to make a pile of aggressive and foolish moves of its own, because believing in magic and blaming “giant corporations” is always easier than admitting one’s own culpability.
(it’s also amazing that these big, evil corporations didn’t figure this out years ago and are only now realizing that they have always had this wonderful power to profiteer by price gouging. oddly omissive and non-greedy on their parts for those so allegedly cunning and covetous….)
so here we go. from politicians who literally lived through the 70’s. hell, some of them were already in office then…
and this instinct is not confined to food.
price controls are on the table. they’re telling us this is what they want. and we’d be well advised to take them at their word on this one.
watching the same folks that came into office and instantly killed pipelines, ended drilling leases, and upped costs then throttle supply chains in sanctions after doing their damnedest to provoke a war (and succeeding) go on to blame putin and oil companies for the spiking prices in gasoline is astounding. (though not as astounding as watching anyone fall for it…)
they ship diesel to ukraine, set off shortages at home, and keep killing leases and upping prices on those that remain.
this is not some black swan free market event. it’s a gang of nasty wreckers running around and spray-painting all the white cygnuses noir.
this is not exogenous happenstance. it’s is entirely down to policy. this will not, of course, stop them from blaming “markets” and “capitalism.” that’s the time honored trifecta:
break markets with intervention and interference in market mechanisms
blame the resultant failure on markets
use that failure as a pretext for more intervention and interference
(repeat until desired levels of crisis and penury pertain)
it’s the mobius loop to regulatory recession.
and we’re on it again.
and they seem pretty determined to blow this issue into the stratosphere, deflect blame, and impose all the policies that will make it worse.
one need not look offshore to see the problem.
uh, might this be a culprit?
Biden’s administration only resumed oil and gas leases on federal lands last month after a federal court ordered the government to do so following a 15-month suspension. The Department of Interior, however, offered only 20 percent of the lands initially nominated for oil and gas leases, complemented by a 50 percent spike in royalties from what’s extracted.
“President Biden remains absolutely committed to not moving forward with additional drilling on public lands,” White House climate adviser Gina McCarthy pledged on MSNBC.
The administration’s relentless animosity towards fossil fuels, showcased in its repeated cancelation of oil and gas projects, has chilled investment in the capital- and labor-intensive industry. This keeps production down despite rising demand at home and turmoil in markets abroad.
In Alaska, upon inauguration Biden canceled leases in the Arctic National Wildlife Refuge, which is forecast to hold between 4 to 12 billion barrels of recoverable oil. He closed another 7 million acres from the state’s National Petroleum Reserve off from development last month.
we are seriously courting disaster.
is already causing this:
do you know what will happen if we cap gasoline prices in the US? yup. even more will flow offshore to where the price is high.
because that’s what commodities do.
then some genius will probably propose an export ban which will provoke response and retaliation and who knows what we’ll suddenly be unable to import anymore. that’s how you start a trade war and break the already badly strained global supply lines completely.
this is a trend reversion that will far exceed in severity and stupidity anything that the age of bell bottoms and the AMC gremlin ever managed. stagflation is already rearing its head. this is how you help it grow 2 more heads beside it like some sort of repressively regulatory hydra. that’s where this cycle of regulate/break/regulate inevitably goes. it’s a feedback loop to losing economic adaptivity and crashing the SS prosperity into an iceberg yo mistook for a harbor.
we inhabit an increasingly serious time because we are led by deeply unserious people.
they believe deeply in top down management of markets, economies, and societies and yet lack the slightest foundational understanding of how any of these things work.
they do not suddenly get smart and capable when they lurch from ruining public health to trying to fix the economy.
it’s the same people.
it’s the same stupid.
and it’s going to be the same horrific outcomes from the same bad practice of replacing that which works and self-adapts with that which sounded good to a bunch of sub-midwit populist panderers who came to power because the west chose ideology over reality.
“price gouging” does not and cannot cause durable price level rise in a free market. the core mechanism of markets is precisely that which renders it impossible.
and if they ignore this, we’re going to reap the same bitter fruits as the last time we rand down this ridiculous road (but at greater scale). it feels like we about 15 minutes from only being able to get gas on odd or even days again depending on your license plate number. (yeah, that really happened.)
price controls and rationing are simpletons’ solutions.
they constitute gravel in the gears of that which would otherwise oil itself.
it’s like treating a cut with MRSA.
they never work. never.
getting this back on track is going to be nastier than people think, but ultimately, the solution for meddlesome and stupid central planners and price fixers is the same as it was when i was a kid.
and sometimes, the old ways are best.