Ron Paul: Abolish all Price Controls – Let the Free Market Function!




by Ron Paul

As the northeastern United States continues to recover from Hurricane Sandy, we hear the usual outcry against individuals and companies who dare to charge market prices for goods such as gasoline. The normal market response of rising prices in the wake of a natural disaster and resulting supply disruptions is redefined as “price gouging.” The government claims that price gouging is the charging of ruinous or exploitative prices for goods in short supply in the wake of a disaster and is a heinous crime. But does this reflect economic reality, or merely political posturing to capitalize on raw emotions?

In the wake of Hurricane Sandy, the supply of gasoline was greatly disrupted. Many gas stations were unable to pump gas due to a lack of electricity, thus greatly reducing the supply.  At the same time demand for gasoline spiked due to the widespread use of generators. Because gas stations were forbidden from raising their prices to meet the increased demand, miles-long lines developed and stations were forced to start limiting the amount of gasoline that individuals could purchase. New Jersey gas stations began to look like Soviet grocery stores.

Had gas stations been allowed to raise their prices to reflect the increased demand for gasoline, only those most in need of gasoline would have purchased gas, while everyone would have economized on their existing supply. But because prices remained lower than they should have been, no one sought to conserve gas.  Low prices signaled that gas was in abundant supply, while reality was exactly the opposite, and only those fortunate enough to be at the front of gas lines were able to purchase gas before it sold out.  Not surprisingly, a thriving black market developed, with gas offered for up to $20 per gallon.

With price controls in effect, supply shortages were exacerbated.  If prices had been allowed to increase to market levels, the profit opportunity would have brought in new supplies from outside the region.  As supplies increased, prices gradually would have decreased as supply and demand returned to equilibrium. But with price controls in effect, what company would want to deal with the hassle of shipping gas to a disaster-stricken area with downed power lines and flooded highways when the same profit could be made elsewhere?  So instead of gas shipments flooding into the disaster zones, what little gas supply is left is rapidly sold and consumed.

Governments fail to understand that prices are not just random numbers. Prices perform an important role in providing information, coordinating supply and demand, and enabling economic calculation. When government interferes with the price mechanism, economic calamity ensues. Price controls on gasoline led to the infamous gas lines of the 1970s, yet politicians today repeat those same failed mistakes. Instituting price caps at a below-market price will always lead to shortages. No act of any legislature can reverse the laws of supply and demand.

History shows us that the quickest path to economic recovery is to abolish all price controls. If governments really want to aid recovery, they would abolish their “price-gouging” legislation and allow the free market to function.

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175 Comments:

  1. Ok so if they don’t control prices and they sky rocket wouldn’t only the rich be able to afford it and everyone else be left out in the cold?

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  2. Obama did win Florida. Yes ron Paul will run in 2016.

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  3. I thought Obama won Florida? That’s what the news said. Can you please explain?

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  4. Anyone think Rand Paul might run in 2016? That could be interesting

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  5. What I mean is that I’d rather have the gas the same day and wait in line at the gas station, not wait a few days if my car’s out of gas

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  6. Lol Tarply Mr. Labor Union? sure

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  7. Oh it does, at least state wide.
    The Constitution would never have been ratified had it not been put in protections for the states to secede.

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  8. if they can get marijuana legal in colorado and Washington. maybe we can get this guy elected on 2016, but we have to start the campaign today!!

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  9. People, we got to just peacefully break free from the illegal Fed. Its called passive resistance. There are ways around everything. Form a freedom community… We are never going to reclaim D.C. and we shouldn’t want to. We just have to stop agreeing with them and going along with anything that comes out of it.

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  10. Heh, let’s stay in the states. 😉

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  11. im a ron paul supporter…and we all have to learn to move the hell on. the world is too far gone to accept civil revolution. the only way things are going to change is it will have to be broken entirely. no matter how right Dr. Paul can be and warn us.

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  12. Oh sure… leave the country

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  13. furthermore, lets say you allow the price gouging,. and they do charge 50 dollars a gallon.
    while blood suckers might ship in plenty of gas,nobody can afford it, they end up getting even less. in today’s financial situation ,to run out 5 gallons of gas in a small generator is easy to do in a day.
    5×50 = 250 dollars a day ,.. just to have a min of power supplied for a heater ect. average down time is about 3 weeks,.. 21 days x 250 dollars a day = 5250.00 of free market robbery via deregulation

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    • But there would have been an incentive to get supplies faster to you guys…everytime u regulate something u lose another liberty…not laws are made to benefit someone other than the intended target

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    • then i will ship in gasoline and sell it at $49/gal and undercut you.
      only lose $1/gal and more people will buy gas from me then you.

      But then some other guy will drive across into the state and sell at $48/gal and undercut me. I’d lose most of my customers.

      etc. etc.

      Eventually the gas price will reach a price where its no longer worth my time or effort to drive gasoline across the border to sell. At which point everyone has all the gas they want.

      Instead now I can pay $3/gal but can’t buy gas anywhere

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  14. yea whenever a person advocates letting price gouging be allowed in disaster area i selectively say he’s a jerk ,.. he is wrong and here is why ,.. in short tem cases liek this disaster the company price gouges,.. the public pays outrageous fees and the “free market” profits while everybody else suffers,.. it does not fix the problem it IS the problem ,.. by the time it self regulates back and forth the short term problem is long since past , in the mean time the people got screwed.

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  15. lol, Austrian school doomers. Webster Tarpley continues to rip you a new one every which way which you have no response!

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  16. you seem to have really selective hearing….

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  17. I hope Ron Paul will still be alive in 4 years so justice can be made.

    Obama and Romney have to go.

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  18. why are you a steaming pile of shit from a faggot’s ass? SAMOA!! CHEEHEE

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  19. the voice of human rights

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