Thursday, September 18, 2008

Hurricane Ike: Gas Shortages

Josh Mathes over at Capitalism's Truths made a great point about political pressure regarding price gouging during the recent hurricane. Gas stations were pressured to hold gas prices steady despite increasing demand, so naturally a lot of them ran out of gas.

Had they been able to raise prices accordingly, shortages would have been reduced and only the people that really needed gas would have bought it. Instead, everyone with the notion to fill up their half-full gas tanks just to be "safe" did so. A good portion of economics is the study of how society distributes scarce resources.

Capitalism is the most efficient system of rationing limited resources. It rations to those that receive the greatest benefit from the resources through supply and demand. Thomas Sowell expressed the concept well with:

While economists are talking supply and demand, politicians are talking compassion, "change" and being on the side of the angels-- and against drilling for our own oil.1
1. Thomas Sowell, Too "Complex"?, May 13, 2008.

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