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.

  • http://www.youtube.com/profile?user=saintearth saintearth

    I voted for GJ. Yes, I hoped he would have gotten his 5%. He got the highest percentage in my state of NM and was only 3.7%

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=MatthewCarpenter Matthew Carpenter

    “History shows that the quickest path to economic recovery is to abolish all price controls.”
    Great summary quote, Dr. Paul!

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=AlanAbdollahzadeh Alan Abdollahzadeh

    Or you can watch the advertisements for the Alberta oil sands. You can even watch South Park. Same amount of education either way.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=AlanAbdollahzadeh Alan Abdollahzadeh

    Ron Paul will no longer be a candidate, so why not plug Gary Johnson? He may not be the exact same (taxes, no gold standard), but he is still damn better than Mittens and Obozo, or whatever the future might give us. Good integrity, a VERY smart stance on social issues…

    Think of him as “Ron Paul Lite”. Perfect for everyone who is too afraid to step away from their neoconservatism and fake liberalism.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=MrGuvnah MrGuvnah

    Good on him, too bad he didn’t get a better showing in the polls, though. (Even though I think he came in at an all time high for the libertarian party!)

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=BONEKILL666 BONEKILL666

    I think Ron’s age is starting to catch up to him. Damn

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=ErikBarmon Erik Barmon

    Probably one of the dumbest talks by Paul I’ve ever heard. Price fixing was done temporarily because of the disaster to precisely to limit the amount each person could buy. The gas lines of the 70’s were due to long term price fixing.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=poopranger poopranger

    You should check out Peter Schiff’s videos… You learn so much

    Like or Dislike: Thumb up 0 Thumb down 0

  • Alan

    I agree with Ron Paul on just about everything except his decision to stick with the Republican party. It’s about like trying to move a mountain with a few hand shovels. The leadership is so entrenched that he has no chance of winning as a Republican candidate. During my lifetime, no third party candidate had a chance of defeating the two main parties. However, I really think the time is right for a third party to have a meaningful chance. If Ron had ran as a Libertarian candidate, I think he would have siphoned off a significant number of Democrats and Republicans who are totally fed up with their iron-clad platforms (military domination of the world, anti-abortion, anti-gay Republicans) and (government control of everything Democrats). What we need is a serious Libertarian movement with it’s own TV channel (Fox is owned by the Republicans and the other majors are owned by the Democrats) ran by Judge Napolitano, a serious grass roots movement to support it, and well be off to the races for 2016. I’m not sure Ron Paul is the right candidate (his age and lack of speaking skills are two major negatives) but Rand would certainly be at the top of the list if he’s willing to take a big leap of faith and get out of the Republican party. Okay, this would take some serious financing but there are enough wealthy libertarian leaning citizens out there that would put up serious $$’s if the right people were behind it. I encourage Ron, Rand and Andrew P. Napolitano to get their heads together and get this going.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=PistolPackingPatriot PistolPackingPatriot

    It has always astounded me that our hundreds of representatives see a never-ending need for more, more, more “laws.” Jefferson said it was the natural progression of gubmint to grow and liberty to shrink. Every time you create a new law, you reduce liberty. We need to push a giant reset button in this country. Roll back to the laws of pre-1913 America. Imagine the peace, prosperity and liberty. Gee, where have I heard those three words before? Ron Paul!

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=MakaveliThadon Makaveli Thadon

    This is why i started hating watching Paul’s videos. You idiots always have to bring up Gary Johnson. Ron Paul is NOT Gary Johnson, Ron Paul is Ron Paul. Go and build his own movement seperated from Paul’s, stop plugging yourself via Ron Paul.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=24hrtech 24hrtech

    always great info!

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=pf91rodman pf91rodman

    Why isn’t Ron Paul my economics professor?

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=animefreak873 animefreak873

    I feel like I’m being educated when I’m watching Ron Paul’s videos.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=jx14aby jx14aby

    The Commerce Clause.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=jx14aby jx14aby

    Now apply this same philosophy to drugs.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=jmt12345ify jmt12345ify

    Death and taxes. It doesn’t matter where you go.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=2JOHNNYT 2JOHNNYT

    Oh I wouldn’t say nobody knows nothing about CIA SOETORO >
    LAUGH your ASS OFF while LEARNING about CIA SOETORO’s
    DEEP multi-generational CIA background! watch?v=3HAF0bd1VrE

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=dedencyde dedencyde

    i beg to differ. The market is controlled by the buying power of the consumer. Price gouging only is allowed if the demand is high enough for it. for example, If a loaf of bread was 50 dollars, then you’d go without bread, therefore the bread maker either drops his price to meet market demand or he goes bankrupt.The collusion of govt allows monopolies by keeping competition out of the “loop”. As long as demand for the product exists, someone will always be there to provide it cheaper.

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=TheDigitalWeb TheDigitalWeb

    100 MILLION MAN MARCH on DC, Wall St, The Fed, and every State Capitol in the country. This CAN be organized…this CAN HAPPEN! Spread the word ! It’s high time we take our Gub’mnt back from the traitors & thieves. We’re shooting for April 22,2013

    17 States filed petitions with the U.S. Gub’mnt to secede from the Union!!
    OR,AL, AR, LA, MO,TX,Al,Fl,NC,KY,IN,NY,CO,GA,­NJ,MT,SC

    Barry is being formally charged with treason?

    Like or Dislike: Thumb up 0 Thumb down 0