Bastiat’s Bastions

A few weeks ago, PricewaterhouseCoopers (PWC) released its study, “Healthcare policy in an Obama administration: Delivering on the promise of universal coverage.” (You can read about PricewaterhouseCoopers here).

Obama’s plan is modeled after the Massachusetts healthcare system. His (near) universal coverage plan comes, not from a public takeover of the healthcare industry public ownership of the means of production in that industry-socialized medicine, but from subsidizing small firms’ healthcare coverage expenses and requiring businesses of all sizes to provide healthcare coverage for workers or face a hefty fine. What is substantially different about Obama’s plan from the Massachusetts system is Obama’s plan does not force individuals to purchase healthcare coverage. What we do have to keep in mind, however, is that it is unlikely that the healthcare reform that goes through Congress and is signed by Obama is the exact one that Obama recommended.

PWC estimates that the federal government’s cost for this expanded coverage, mostly from subsidizing small businesses, would amount to $75 billion a year, at least initially. As with all entitlement programs, initial estimates of future costs are underestimated and often overlooked. Real costs for Medicare and Medicaid were about 10 times what was originally estimated. Let’s hope that the estimates for Obama’s plan come closer to the mark. Here is what happens: as more people are covered, demand for health care expands greatly, pushing healthcare costs up dramatically. This results in calls for price controls, which create shortages, along with political civil wars to drop coverage for certain procedures and certain medications.

Healthcare coverage for more people, while laudable, drives healthcare prices up for everyone and ignores consideration for how these more highly demanded services are to be delivered. Giving more people the ability to pay without increasing the number of healthcare providers merely puts more people into waiting rooms, without doing anything about actually getting people diagnosed and treated. We end up worse than the Canadians, with not only month-long waiting lists for specialties, but with month-long waiting lists to see primary care physicians. Massachusetts was able to handle this by getting more doctors and nurses from other states. This cannot be done so easily for the nation as a whole.

We often fail to see things from both sides. It is easy for us to put ourselves in the place of healthcare buyers, because most of us are. We have a difficult time seeing the big picture of both healthcare buyers and healthcare suppliers, but if we succeed in putting more people into waiting rooms without getting more doctors and nurses to into examining rooms and treatment rooms, we will see prices for healthcare take the express elevator through the roof. Then, political demands arise for a government takeover of the healthcare industry. As Steve Lieber, CEO of the health trade association Health Information and Management Systems Society (HIMSS), is quoted as saying: “Apply traditional economic principles. If you have an increase in demand, there should be some type of effort to address the supply side. It takes time to increase the number of physicians. As demand increases in that sense, it can be an economic incentive on the provider to become more efficient.” (p. 18)

However, the AMA and ANA control the accreditation of medical and nursing schools, and the licensing of doctors and nurses. There are several ways of increasing the supply of providers. Massachusetts, for instance, allows patients to designate a nurse practitioner or physician’s assistant as their primary care provider. They also required their medical schools to graduate a minimum number of primary care physicians. Of course, this does not keep these graduates from going out of state and obtaining more lucrative specialties.

Two things beyond the Massachusetts reforms are needed to really increase healthcare supply. First, is to require the medical schools and nursing schools to increase their graduation numbers. Second, with the political support from the AMA and the ANA and the current political frenzy over immigration, it is far too difficult for qualified doctors and nurses from overseas to come into the US and practice their professions—this needs to be reversed.

All-in-all, Obama’s plan is not the takeover of the healthcare industry that Hillary Clinton’s almost became. Still, without some rollback of the governmental regulations that provide unnecessary barriers to entry into the healthcare industry, his plan will cause prices to rise so substantially that the voters will demand a government takeover of the industry.

-MC

Well, this post is not really from a guest blogger, but Gokhan Karahan is, regretfully, no longer teaching and working at Nicholls State University. Dr. Karahan was one of the four founders of Bastiat’s Bastions back in 2005, and we will not let him go. Dr. Karahan sent this to me today to post.-MC

The ill-timed and ill-designed bailout does not seem to show any sign of bringing solutions to the current economic meltdown. Given that there will be a bailout (as soon as Secretary Paulson and his team finally make up their mind on what to bailout and how much!), not attaching strings to how banks may use the bailout money makes one feel that the government’s ultimate objective is to create a “lean” and more competitive banking system. Call it a conspiracy theory but stories available in the Wall Street Journal, New York Times and several blogs, all point to the possibility that smaller/regional banks may be swallowed up by the very banks asking for the bailout money. In other words, it is possible that the government feels that a fragmented banking system may be a bigger threat to the US financial dominance than a short run credit freeze.

About a quarter century or so ago, the manufacturing share of the US GDP was about twenty-five percent. The financial services industry had a twelve percent share. We succeeded in reversing it in less than two generations. With the advances made in the computing and telecommunication technologies, this “new service” economy was to increase our standard of living to unimaginable levels. Smart people came up with financial products that were sold as “high return” investment vehicles. We were led to believe that those conventional thinkers arguing otherwise were all wrong when they questioned where the “beef” was coming from. Moreover, some financiers even bet that the stock market would hit 36,000!!!

Well, it has not and will not for a long time to come! Easy credit and imprudent government policies encouraging “ownership” have led to financial practices, some of which were outright fraud and speculation. We now realize that the “new” economy is still the old one with a bruised face. This time, however, it will take a lot to make the rest of the world believe in our “high yielding” financial products as well as credibility. In other words, a good portion of the US GDP may be in trouble. Unfortunately, the manufacturing sector does not have the muscle it had not long ago to help us out.

Where do we go from here? Given the recurrence and the magnitude of the financial crisis since the 70s, moral hazard does not seem to be a part of the government’s calculus in bailouts. In fact, the bigger the failure, the bigger the bailouts. One way this vicious circle could be prevented and excesses in the economy can be corrected is to live through a severe recession now and not bailout anybody. This would mean a shrinking economy but over the long run it would make us learn not to live beyond our means. If not, there will be a time when this country would not be able to spend its way out with borrowed money from overseas. And, I truly fear that we are not too far from it.

Gökhan Karahan
Associate Professor of Economics
College of Business
Delta State University
662.846.4195
gkarahan@deltastate.edu

Over the weekend, Senator Jim Inhofe (R-OK), who voted against the bailout, criticized Treasury Secretary Paulson for “not telling the truth” about what Treasury would do with the bailout money. As I posted here, I don’t buy this at all. If the intent was as specific as Inhofe seems to think it was, there was no reason to have “any other financial instrument” in the text of the bill.

Regardless, this is what Inhofe said:

“It is just outrageous that the American people don’t know that Congress doesn’t know how much money he (Treasury Secretary Henry Paulson) has given away to anyone,” the Oklahoma Republican told the Tulsa World. “It could be to his friends. It could be to anybody else. We don’t know. There is no way of knowing.”

I can’t be certain, but it’s almost as if Inhofe was referring to Paulson’s “friends” in an off-hand manner. But I wonder, is there a simple rent-seeking story here? Paulson, after all, was an investment banker, starting at Goldman Sachs in 1974, and ending up its CEO in the late 1990’s. And, we know that the current crisis showed up in the investment banks, not the commercial banks. We even know that some in the commercial banking industry didn’t want any part of the bailout money.

Could the explanation for this bill be as simple as: investment bankers went to Paulson for help with their financial problems?

NM

Responding to McCain’s sole zinger line in the final debate, “If you wanted to run against George Bush, you should have run for president four years ago,” Obama compared McCain’s voting record with the White House position and pointed out that McCain voted with the Bush White House 90 percent of the time. Then Obama repeated that old line “And if it walks like a duck….”

In a now well-known interview, Obama’s running mate, Joe Biden, laughed off a question about Obama being a socialist. Well, there are very few admitted socialists elected to office in this country. And to my knowledge, only one avowed socialist elected to any national office in the last 30 years, Bernie Sanders from the state of Vermont (see this article in the New York Times Magazine from January 21, 2007 by Mark Leibovich). Sanders calls himself a social democrat but has officially run as an Independent over the years.

I started to wonder how close Obama’s voting record was to Senator Sanders, since the closeness of McCain’s vote turned him into George W. So I went to the website of the U.S. Senate and found the Senate roll call votes here. Both Obama and Sanders are freshmen Senators in the 110^th Congress, so it makes their voting records easy to compare.

In one crucial respect, their voting records are quite different. Senator Sanders missed only 6 out of 655 votes held in the Senate in the 110^th Congress, voting over 99% of the time. Obama, on the other hand, had voted only 36% of the time in 2008 and slightly less than 54% of the time in the 110^th Congress (2007 and 2008 combined). Of course, Obama ran for president and Sanders did not. Still, by August 3, 2007, Obama had already missed more votes in the U.S. Senate than Sanders had by October of this year. And there weren’t any primaries to run for before that August date.

After excluding the many votes that Obama did not cast and the few that Sanders could not cast, there were 348 votes where both voted. Of these 348 votes, Obama voted with Sanders 320 times, or 92% of the time.

Certainly, Obama’s redistribution policies and his proposed takeover of the U.S. health care system, his agreement (like McCain and Bush) to take over banks and help out the auto industry, his plan to take away the secret ballot from workers for union representation elections and his proposal to lift the minimum wage to one that compares to what the French have (which has led to widespread minority youth unemployment and riots there), all show that

Obama has the socialist walk and quack down pat.

With a voting record that matches the voting record of an avowed socialist, how can Obama deny being a socialist? Bernie Sanders doesn’t.

-MC

Andrew Napolitano has an article in the Wall Street Journal today titled: Most Presidents Ignore the Constitution. The article analyzes several of the constitutionally unfriendly actions of past presidents and notes “In virtually every generation and during virtually every presidency (Jefferson, Jackson and Cleveland are exceptions that come to mind) the popular branches of government have expanded their power.” I may have to take issue with Jefferson being an exception (I was born in Louisiana), but that’s another post.

Anyway, the article brings up specific aspects of the Constitution which show how concerned the founders were with economic freedom. Napolitano writes:

There is no power in the Constitution for the federal government to enter the marketplace since, when it does, it will favor itself over its competition. The Contracts Clause (the states cannot interfere with private contracts, like mortgages), the Takings Clause (no government can take away property, like real estate or shares of stock, without paying a fair market value for it and putting it to a public use), and the Due Process Clause (no government can take away a right or obligation, like collecting or paying a debt, or enforcing a contract, without a fair trial) together mandate a free market, regulated only to keep it fair and competitive.

When the government does enter the marketplace, we lose some of the basic protections we were guaranteed in the Constitution and we frequently end up with bad economic policies. The really interesting question for me is this: Why does the public regularly elect (and re-elect) officials who enact bad economic policies and/or chip away at the Constitution?

Napolitano seems to think (and I’m not quoting him) the answer lies in the “pigs at the trough explanation,” whereby voters send to Washington those politicians they believe will bring the most tax dollars home for them. Regardless, I thought of another explanation from Bryan Caplan’s Myth of the Rational Voter.

Caplan’s research uses data from the Survey of Americans and Economists on the Economy. The survey asks both economists and members of the general public an array of questions on how the economy works. There are significant disagreements between professional economists and laymen (on 33 out of 37 questions).

Caplan is simply verifying what most economics professors understand quite well: many people have no idea what good economic policies are. Students enter economics classes with severe biases against sound economics (war is good for the economy, protectionist policies protect jobs, etc). These biases, consequently, lead to popular support for policies that most economists would deem (economically) harmful. It’s at least plausible that the same phenomenon occurs in regard to our Constitutional protections.

In other words, it’s possible that voters don’t throw out politicians who chip away at the constitution because they don’t realize the benefits of our constitutional protections. Just as few people understand the importance of opportunity costs unless they study economics, few recognize the significance of the Takings Clause unless they study the philosophy behind the Constitution. By not fully understanding these ideas, the public makes it fairly easy for politicians to push “popular” policies. Just tell the people we need more financial regulation, they really don’t know what credit default swaps are anyway.

The only hope that Caplan’s work offers is that most politicians aim to sound more populist than they really are. Thus, Obama does not really want to redistribute too much wealth because he knows that sort of policy will kill the incentives needed to generate wealth in the first place. Any politician who, for example, calls for Constitutional guarantees for a job or a living wage, doesn’t really want to go that far because they realize the economy will suffer (and then they will be judged poorly).

I’m very much convinced that few people can describe what a socialist economic system is (based partly on my informal polling of many college students). And I’m very much convinced that even fewer people understand that socialism fails as an economic system because of what it does to economic incentives. I just hope that Caplan is right and the current crop of politicians doesn’t really want to go as far as they say. If you’ve been reading any of my recent posts, you’ve probably guessed that I’m not exactly convinced yet.

NM

In 1944, an Austrian economist, Frederick Hayek wrote the book, The Road to Serfdom. His book was later shortened and released by Reader’s Digest, and even came out in comic book format and distributed by General Motors. Hayek dedicated his book to socialists of all parties. The central idea of the book is that socialism or collectivism has the same result, whether it is the sort we see in the old Soviet Union and China, and now in North Korea and Cuba, or Fascism of the sort we have seen in Hitler’s Nazi Germany, Il Duce’s Fascist Italy. Hayek’s thesis was that collectivism leads down the same road to tyrannical dictatorships by tyrannical dictators, and he has a very intriguing chapter on “why the worst get on top” in socialism. That very same road, of socialism or collectivism, whether the communist or fascist variety, where people surrender their freedom for the good of the country or the good of the universe, and fall under the spell of the idea that somehow something can be good for the country without being good for any particular person in that country.

Hayek put Fascism and the Naziism in the same category of the Marxism of the Russians, incensing political leaders and academicians in the U.S. as well as with our allies.

Why? The Russians were our allies and the Nazis our enemies. Also, many academicians, even academic economists, were taken in by the ideas of the Marxists. Their societies could not possibly be two sides of the same coin. Or could they?

Well, as my title suggests, we are not only on a road to serfdom, but we are speeding down it as fast as we can go, with little to slow us down.

It is not just that we are about to elect a radical left progressive to the White House. It is also not that both houses of our legislature are also going to have heavy progressive majorities.

No, we are not about to get on the autobahn to serfdom, we have been traveling on it awhile. Certainly policies passed under FDR’s New Deal got us on that road. And that was about the time that the real Autobahn in Germany was being built. It was started before Hitler came to power, but much progress was made on the roads under Herr Hitler, and much of it, fittingly, with slave labor.

The lanes widened with LBJ’s “War on Poverty,” a war that we should all agree did nothing to alleviate poverty, but perhaps only entrenched it and made it more durable, more systemic.

The highway was then super-sized, going from four to eight lanes, and all headed in the same direction, with banking of the curves added to keep us from crashing, but only encouraging us to go faster still. This was accomplished this past month with Bush’s gigantic bailouts with equity positions taken in banks worldwide.

Here are a few signposts along this “Autobahn to Serfdom:”

1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all rights of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.
6. Centralization of the means of communication and transport in the hands of the state.

Notice that # 5 was pretty much taken care of in the U.S. and abroad with the giant bailouts. Both #2 and #3 seem to be well on their way with the next president and the next congress. You should note that these signposts are taken from Marx’s own Communist Manifesto.

Zoom, zoom, zoom!

-MC

In the now-famous incident where “Joe the Plumber” questioned presidential candidate, Barack Obama, over his intentions to raise taxes on individuals earning more than $250,000 per year, Obama said “when you spread the wealth around, it’s good for everybody.” So, what is wrong with that, what is wrong with taking from some to give to others? Let me count the ways that wholesale redistribution should be cause for concern:

1. If the government has the right and ability to take from the rich to give to the poor, or from someone you don’t favor to give to someone you do favor, it also can take from those you do like to give to those you do not.
2. Reducing the incomes of the rich in order to increase the incomes of the poor reduce incentives to save, to invest in further education and to work hard. Certainly, our forefathers saw this in Plymouth when the Pilgrims came to this land. Great harvests, for which our first Thanksgiving was celebrated, came on the heels of starvation. What made the difference? Private property in farm land that gave families an incentive to work on their own lands, and to feed their own families. When everyone shared equally in the harvests, incentives were so weakened that they barely were able to survive. See this 2006 post I penned with my student, Amanda Walker, on Thanksgiving.
3. The third way is one that people often do not see, which is that resources that could be very productive elsewhere suddenly get devoted to fighting to come out winners in redistributive efforts, while other resources fight to keep from becoming losers in the redistribution game. A good indication as to what awaits in the fight over funds to be redistributed can be seen now in the current lobbying competition for the bailout funds in Washington. This wasting of resources in non-productive fights over who gets what and who has to pay is what economists have termed “rent seeking,” the competition for goodies out of someone else’s pockets. Take a look at this article to get an idea of where we are headed. Lobbying is an expensive undertaking and is done by very talented individuals. These resources just tend to cancel each other out instead of producing anything of value. And when resources are diverted from productive activities to non-productive activities, our economy underperforms and grows at a slower rate.

Now both points 2 and 3 tell us that economic growth will be slower with substantial redistribution than without it. Now suppose that economic growth over the next 100 years would be 5% without redistribution, but a whole percentage point less, 4%, with it. Think of someone putting aside $1500 a year each of those years, say by making contributions to an IRA. Of course, somewhere in there money passes from generation to generation, but let us suppose that funds are added at the same amount year after year. At the slower rate, the sum grows to a whopping $1.93 million after those 100 years, but at just 1% faster rate of growth, the sum grows to $4.1 million in that same time period. That more than twice the wealth can support more than twice the annual income flow from that wealth. Even with a substantially wider distribution of wealth, the higher rate of growth allows much more to be done in the economy for those at the bottom.

But perhaps the best illustration of mass redistribution to equalize outcomes is from that master story teller, Kurt Vonnegut, in “Harrison Bergeron.”

Be sure to read these few pages by Vonnegut as he portrays a future society that has equalized society in the only way it can truly do this, by handicapping the very talented and the very bright, by bringing everyone down to the same low level. Notice that everyone is made worse off as a result, as even entertainment is reduced to a low level. Spreading wealth around not only fails to make everyone better off, it makes very many of us worse off.

-MC

Before anyone gets too excited about the prospect of universal healthcare insurance, we should stop to think about what this will really accomplish. First, we should acknowledge that the very poor and the old are mostly covered, and that the largest part of the uninsured really are people who expect to have little use for medical care, and so, take the risk upon themselves. This is the group of 18-35 year old males.

We should note that universal health insurance, by itself, will do nothing to reduce healthcare prices, and in fact will tend to increase prices of health care and the premiums for health insurance because it will serve to increase the demand for healthcare while doing nothing to also increase the supply. Any increase in demand for healthcare because doctor’s visits may suddenly appear to be less costly (paid for through premiums or payments from the government) will merely push up the basic price of healthcare. Healthcare premiums will be pushed up as a result to cover the extra demand.

What is happening now, though, with partial coverage is a problem as well. Here is what happens. Some are covered, and some are not. Those covered are able to access health care at subsidized prices (that they pay for in fixed monthly payments), while those who are not covered pay full price. I think of it like making beer insurance available to college students, insurance that pays their beer tabs. This boosts the beer consumed relative to the full price, or in economics lingo, it boosts the demand for beer. If beer were like medical care, the problem would suddenly become very serious, because the supply of medical care is tightly limited, by medical schools, professional associations, licensure, and even government limits on supply.

But medical care is not quite like beer, because getting poked, prodded, probed, stuck, bled and disrobed, is not as appealing to most as a few cold ones. Many go to the doctor only reluctantly, just as many leave the pub only reluctantly.

The problem is that when some get their health care at some subsidized price, the demand ends up increasing and the full price to the uninsured increases. Some get healthcare a little cheaper perhaps, while others find it difficult to afford.

But what happens when we all are covered with healthcare insurance? It is much like the problem when we all stand to get a better view of a play in a football game–none of us end up getting a better view. When we all get healthcare insurance, we end up paying very high premiums and doctor visit fees much like we would have faced without coverage for doctor visits.

When we have privately paid for health care, or privately paid insurance and managed care plans, the managers of such plans cover certain treatments and do not cover others, bringing to mind the 1997 movie, “As Good as It Gets,” with Jack Nicholson, Helen Hunt and Greg Kinnear, where a boy’s asthma treatment was not covered by his mom’s HMO. At least there is some competition between plans, and employers do most of the “picking” amongst plans, but do so as an alternate means of paying their employees. As a result, though, legislators then have an incentive to mandate coverage of treatments that have political support.

The decision as to what is covered and what is not comes about as a political decision, with the benefits going to small concentrated groups and the costs spread over the premium payers. Politicians can point to greater coverage as an accomplishment of theirs, and since payments are not coming from tax payers but rather from premium payers, politicians can also point out that the government spending and the tax burden was not increased, laying the blame of ever higher premiums on the shoulders of the health insurers and HMOs. The politicians are ordering greater coverage, but someone else is paying for it off budget.

What differs with government health single-payer plans or nationalized plans is that it becomes clear that the politicians are responsible for the costs they no longer have private firms on which to lay the blame for mounting costs. Then, they act much like the HMO Helen Hunt faced in “As Good as It Gets,” but now without competition. Then we start to see both tough choices and questionable choices being made. For instance, this summer stories (see these at Fox and KATU, Portland, OR) began to pour out of Oregon of cancer patients being denied chemotherapy, but offered physician assisted suicide instead, because easing the pain and bringing about earlier death of patients too costly to treat is the right thing to do.

So it goes.

Then there is this recent story from Britain about Baroness Warnock, a medical ethicist and an advisor to the British government, who has even suggested that dementia patients may have a “duty” to die.

She insisted there was “nothing wrong” with people being helped to die for the sake of their loved ones or society. The 84-year-old added that she hoped people will soon be ‘licensed to put others down’ if they are unable to look after themselves. And so it goes. And Welcome to the Monkey House.

-MC

One of most viewed economics blogs is Steve Levitt’s Freakonomics New York Times blog.  Levitt is the primary author of the “bestselling” non-fiction book, Freakonomics.  Take a look at what Levitt’s colleagues, Doug Diamond and Anil Kashyap (all at the University of Chicago) have to say about what has gone on these last few weeks with bailouts and failures of financial institutions.

-MC

Continuing on my oil and gasoline prices theme, I thought I would mention something that is already obvious to many of you, and that is how much gasoline prices have skyrocketed, in spite of the drop of crude oil prices below the $100 mark.  As I write this, on the Sunday evening after Ike hit the Texas coast, gasoline prices in Thibodaux, Louisiana range from $3.79 per gallon at my neighborhood convenience store to $4.68  near downtown Thibodaux.   (For a basic lesson on gasoline pricing, take a look at this primer from the Energy Information Administration of the U.S. Department of Energy.)

Before your knee starts to jerk, and you want to scream “price gougers,” stop for one moment to consider where Ike hit and the industry in that area.  Ike struck Galveston and Houston, but caused flooding all the way to the Mississippi coast. Lake Charles, Louisiana, which was badly damaged by Rita in 2005, was flooded worse by Ike.  The Gulf Coast from Lake Charles, Louisiana to Corpus Christi, Texas, has more than 39 percent of the U.S. capacity for producing gasoline (I found refining capacity information also at the Energy Information Administration site).

With workers to nearly 40 percent of our domestic capacity to refine gasoline unable to get to work, many still in the dark and the sweltering Southern September, with no electricity in their homes and their workplaces likely damaged by the winds and floods, it is perfectly reasonable for the refineries to raise their prices to send the gasoline consumers a clear message: “Conserve! We don’t that have much to go around, and it will have to last until we get these refineries back on their feet.”

Clearly a worse situation would be one where we forced the refineries to keep their prices low, keep them from price gouging, and instead, run out of gas in a week and a half.

Many of us in the aftermath of Gustav, with memories of Katrina still all too fresh, know the feeling of not being able to get gasoline, electricity, fresh water and sometimes even food.  We know that running out of some things, such as gasoline, can sometimes have dire consequences.  I have run out of gas before and probably will sometime in the future.  But if we all run out of gas, our society grinds to a halt.  The food on the grocery store shelves runs out very soon.  Food does not make it from producer to consumer.  We starve.

The large price variation of almost a dollar a gallon from low to high prices should tell us that something else is going on, that is failing to keep prices in their usual close range.  I cannot be sure that this is the reason, but it may have something to do with what we observe:  Many states, and Louisiana is one, have laws that force gasoline retailers to charge a price in accordance to the wholesale price they paid for gasoline.  In Louisiana, before Katrina, gasoline retailers were forced, by law, to charge a 6% markup over wholesale price.  After Katrina, the Louisiana legislature allowed prices to fall to the wholesale price, but no lower.  As explained, wholesale prices went up as Ike wound his way to the beaches and refineries of the Texas oil coast.  Some gasoline retailers still had cheaper gas (as far as the already paid “wholesale price” was concerned), while others had empty tanks and were forced, by law, to charge the new, higher price.

High prices during low production periods send us the same message as a ship captain putting his crew on half rations upon learning that half of his galley supplies became contaminated.  To fail to put a crew on half rations in such a situation would be reckless and irresponsible.  High prices let consumers decide which uses are important enough to pay the high prices and which are not important enough.

You can listen to a brainless, jerking knee and call $4.68 a gallon for regular gasoline “price gouging,” but I call it something else: “social responsibility.”

—-An update:  It seems the fears of the refiners were not borne out and Ike did little damage to our refining capacity as reported by Bloomberg.—-

-MC