Tuesday, April 29, 2008

Quote of the Day

by Tom Bozzo

Michael O'Hare:
The ease with which politicians say "gas prices are too high" combines their cowardice (or cynicism and irresponsibility, or maybe just ignorance) with a widespread confusion of price with cost in the public mind... The distinction is no piece of technical arcana, but one of the most fundamental keys to getting policy right, and in this case, a very big batch of policy with enormous consequences. If you don't understand the difference, you do what Hugo Sanchez Chavez does and suppress the price by enormous public subsidies. Unfortunately, the cost of anything is quite independent of what we want it to be, or the price at which it is offered, because cost a reality sort of thing, the value of the economic resources consumed in providing it... If you lie about the cost of gasoline, or anything, by offering it for sale at an arbitrary price, the cost doesn't change, but the behavior of everyone gets crazy with very bad consequences.
(A related rant may be forthcoming, assuming I have time to write it later.)

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Aw, c'mon, you have half the rant already.

The cheap shot at Chavez ignores that those "enormous public subsidies" keep that market growing (otherwise, people don't buy and starve, which costs the government more)—and that those subsidies are only possible because of the difference between the cost and the price of the commodity referenced.
I don't think he's taking a shot at Chavez for using oil revenues to subsidize the Venezuelan welfare state, such as it may be, in general. The case for the Chavez line being a cheap shot is stronger if you point out that subsidizing Venezuela's internal consumption of oil is not the market's biggest problem (or stupidest distortion) by a long shot.
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