I qualify my title because I happen to know quite a few people in politics who are really bright, but some national political figures are doing their profession a disservice (again). The NY Times reports that several states and the federal government are contemplating ideas such as price controls, repealing gas taxes, and other interventions to help bring prices down. There are several reasons why this is a bad idea:
1. Demand - Economics 101 teaches us that lower prices increase demand. As the photo caption in the Times article points out, some people stop buying gas when it gets more expensive. Lowering the price will encourage them to buy more. If our problem is supply interruptions, spiking demand by lowering prices seems to be A Bad Idea.
2. Conservation - the best way to make someone change their habits is to make it expensive. For example, every $1 increase in cigarette taxes reduces smoking by 10%. If we want people to conserve gas by buying hybrids, carpooling, etc...then lowering gas prices is the last thing to be doing.
3. Investing for the future - we all know that gas is limited. It may not run out for decades, but we might as well start preparing now. You know all that technological innovation that's supposedly going to save our assess when oil runs out? Well, even the smartest tech can't compete with government subsidies for gas and oil. Let's give hydrogen, wind power, and the rest a fair shake. In fact, let's use that gas tax revenue to invest in alternatives so we don't torpedo our economy with shortsightedness. We've tried that plenty of times already via the deficit, needless wars, and other innovations of the Bush administration.
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