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. Texas will be first. If yall need a safe haven from the feds come down south we have plenty of guns.

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  2. Spread the message of several states are having a petition of seceding from federal government.

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  3. Dr Paul is simply stating Economic FUNDAMENTALS...

    High Demand and Short Supply > brings about high prices,
    >which in turn invites more suppliers (competition) to take risks and enter the market, >
    which quickly lowers prices to normal market balance between Demand-Supply.
    |
    The Keynesian Economist dismiss the "Price Mechanism" as unacceptable "gouging" and favor government forced Price Controls, which gives Government false power over the market place.
    |
    The net result.... shortages! Price Controls have never worked in history and always result in the need to ration.
    |
    AND so too will Obama-Care
    1. Create shortages of Doctors and Medicines
    2. Reduce the overall quality and quantity of health care
    3. Will Increase prices AND Decrease quality.

    The Sandy fuel shortages are a perfect example of how Ignorant the Gov. Socialist are about Basic Economics 101!

    and

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  4. Don't be attached to the master. In other words listen to the message. Keep pushing forward. We must get the liberty and federal reserve message out. The other message as well stop policing the world. Ron Paul wont live forever. It is up to each one of us to share what he has taught us. We must elect leaders who understand and will obey our Constitution.

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  5. I have to agree with you there. The movement for me has never been centered around any individual. I became a libertarian years ago and decided to switch back to Republican just to vote for Gary Johnson I stuck around for Ron Paul and sent him some donations.

    I believe that talking about gary is important to show that its not just one crazy guy who believes in small government. There are at least two and even they disagree. Lets talk about it and spread the word.

    Both are great men.

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  6. French Canadian,
    Had a debate today with another educator liberal friend who totally supports Obamacare. Sad to say she just doesn't get it. She is supporting exactly what she says she hates=the corporate world. Went to the Occupy protest here in our state, but doesn't see that Obamacare was created for the healthcare industry, Big Pharma and conventional medicine...I'm hoping to take time this winter and read what it contains in it since even lawmakers don't know what it says.

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    • Robin,

      I don't know if you know or if you read my comment on "Ron Paul on the Alex jones Show" thread, but I decided to stop posting on this site. Too many recent nitwits who joined this site only to bash Alex Jones. I want no part of this. These people do not fool me, they are not Ron Paul supporters, but trolls. I SEE them!

      But for you, I will make an exception. Everytime you will adress me a comment, I will answer it. I still come here to read a few comments like yours and some of the other bloggers I appreciate. But I do not read the other comments.

      I noticed that yesterday you asked me about Colonel Petraus who resigned and about the relation to the death of the Ambassador. Well today, Alex talks a lot about that. He says that between Dr Peizcenick and Colonel Shaffer's interviews, he tends to believe more Shaffer. I will post the part where he talks about it later tonight for you.

      By the way, Bev Harris is on the show today.

      As far as your liberal friends who likes Obama, I'll say like Lew Rockwell ( at least I think it is him who said that)... don't lose your time and energy with people who don't want to know...lol

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  7. C:\win

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  8. Jew, Romney & Ron Paul -

    1. Jewish neocons served under Bush were also on Romney's campaign.

    2. Ron Paul had no Jewish neocons.

    Conclusion -

    No Jew can manipulate Ron Paul to send Americans to war & death for Israel.

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  9. Parrot

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  10. Ron Paul is a great teacher. Thank you for everything that you have done for humanity.

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  11. ron paul is AMAZING

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  12. me too

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  13. then we have to take out the GOP right now and we have to become the new GOP

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  14. then its time for american revolution part 2?

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  15. Simply brilliant. God bless you, Ron Paul. Greetings from Canada.

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  16. The U.S. :/ we stopped doing this around the time the Founding Fathers died out.Technically all governments are under this rule because all governments are founded for the benefit of the civilians, most people don't realize this and accept the government as a necesarry evil.

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  17. All i'm saying is build the movement around Gary SEPERATELY from Ron Paul, they differ on a few policies and aren't the same people.
    Had Ron Paul built his movement around someone else that came before him, do you really think there'd be this much enthusiasm about him ? Of course not.
    So, if Gary does that, there won't be this much enthusiasm about him either, because he's not Ron Paul. It's just common sense.

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  18. I would like an alternative to high prices. I have actually seen gas stations raise prices like after the 1st 9/11. Buy I guess that's the american way u know. The system to work just fine when they do raise prices for supply and demand.

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  19. I see. I will support ron paul and I agree with his message here.

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  20. People get pissed when the station does the "gouging" but for those who got there early its perfectly ok to sell it to those in the back of the line for 3-4X the price. But that isn't being exploitive now is it....

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