Thursday, May 10, 2007

Political Gas

When gas prices go up, people use less. Higher prices eventually equal lower demand. No legislation required. No enforcement. No bureaucracy.

Of course, there is an inevitable delay in the adjustment. People logically wait to see if prices will come back down, or they wait until it is more economical to replace their current car with a more gas efficient model. Why buy a new car if you don't have to? A family can regulate the use of an old car -- even a gas guzzler -- far more efficiently than it can regulate the rapid depreciation of a new one.

Yet, impatient to "solve the problem" and gain political capital, politicians have jumped on the issue of gas prices with the conviction that they are the only power that can truly curb demand. Rather than relying market forces, they craft legislative plans to "cut future US gasoline demand and improve the fuel economy of cars and trucks" (see Harry Reid's and Nancy Pelosi's comments at CNN).

The political message is clear: in order to save Americans from the painful choice of using less gas or sending more of their money to the companies that actually make the gas, the politicians are going to make Americans use less gas and send more of their money to Washington.

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