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.

»crosslinked«

Likes(0)Dislikes(0)

175 Comments:

  1. Are there enough rich people to buy lots of gas? If you have to fill up two SUV's and a Lexus, that's lots of gas. Is it possible that these large purchases with low levels of gas could use up all the gas?

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  2. Gary Johnson basically said the same thing during his debate with Jill Stein.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  3. Ron Paul schools Barack Hussein:
    "If you don't know the Constitution (the one you swore to protect) you shouldn't be in Office."

    10 minute video --- spread it like wildfire!

    (also, note how without a teleprompter Lil' Hussein can't put two words together without mumbling, bumbling and stumbling)

    http://www.youtube.com/watch?v=qcjt36Txzao&feature=related

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

    • How could we vote this guy back in? I wish that people in these big cities who voted for him could get his whole message. .. all they get is Ron Paul's denial of things that seem like good things but they never get his reasoning. .. to them they say price gouging is bad, which morally it is, but they don't get that it would have bought supplies faster instead of waitin for fema to get there. .. people were willing to freeze to death for their hand out. ..if you know you can make money the faster you get there with supplies you hurry which will drive prices down because more supplies means more competition to sell

      Likes(0)Dislikes(0)

      Like or Dislike: Thumb up 0 Thumb down 0

  4. If he runs in 2016, the Republicans will do anything they can to stop him.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  5. I don't think so but states have the right to secede. But the Federal government would never allow that.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  6. The Declaration of Independence does. And that is U.S. Federal Law.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  7. No

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  8. "New Jersey gas stations began to look like soviet grocery stores".
    Powerful line.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  9. I hate that cheap knock-offs are actually overpriced.. Clarks does it.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  10. This is where Ron Paul is off his rocker. Jew bankers and companies with labor overseas want this shit. This idea of free markets governing themselves is laughable. You'll only see one of two things: 1) price gouging on monopolies - with constant buy-outs of small competitors 2) slave labor having to compete with 3rd world labor

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  11. What kind of idiotic nonsense is this? Leave it to wRONg Paul to come up with one fuckin' crackpot pipe dream after another!

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 2

    • I see you always with your crude comments, but did you even understand why he would say that. ..I don't care to argue with u, but I hope you're genuinely disagreeing. ..idk if you understand that he is against foreign wars, anti gay laws, anti drug, and tax laws... you seem quick to judge without reason which is your right until liberals put a law on that. .. if you don't believe they will look at the guy who made the YouTube video that supposedly caused the benghazi attack... he is in jail...civil liberties are quickly being taken away from you with all this regulation. ..Ron Paul may seem apathetic but there is educated reasoning

      Likes(0)Dislikes(0)

      Like or Dislike: Thumb up 0 Thumb down 0

  12. Think of Cell phones as one example. Initially, they are expensive until the all the people who are willing to pay the high price have been satisfied, then the prices fall rapidly. Only way to keep the prices high is to only create a certain amount of cell phones...ie, Law of Scarcity

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  13. Yes, this is true initially but you have to ask yourself this question, Are there enough rich people that have access to the gas and and will they purchase all the gas? the answer is no. Gas is not a niche market therefore sellers want quantity purchases which forces prices down or the law of scarcity prevails.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  14. I registered to vote for ron paul and look how that turned out... you think if he runs on 2016 the same exploitation wont happen?

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  15. Delete this comment dude.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  16. Perhaps, but also those who are rich would also have the means to ship more gas into the area in order to make a profit. They had no incentive to do so.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  17. Rand is not Ron. Rand is owned by the corporations, Israel etc. Rand is not Ron. Follow the money.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  18. yes he makes my cock hard.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

  19. If you "price gouge" and noone can afford the gas, the price will lower in order to spur demand. Someone will have a sale, and then someone else will have a bigger sale, and that will continue until the price is reasonable.

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

    • yep, but you need the high price to entice people OUTSIDE the affected area to ship additional supplies at more risk and cost into the area with the hope of making an excess profit (and hoping your damn tanker doesn't end up in a ditch, or hit by a tree).

      Likes(0)Dislikes(0)

      Like or Dislike: Thumb up 0 Thumb down 0

  20. That's a Misesian idea. Have you read Rothbard?

    Likes(0)Dislikes(0)

    Like or Dislike: Thumb up 0 Thumb down 0

Leave a Reply

Your email address will not be published. Required fields are marked *


+ 5 = twelve

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>