Wednesday, August 31, 2005

Bill O'Reilly - Economic Genius

I was never that big of a Bill O'Reilly fan. He certainly brings a chuckle about every now and then when he pins someone down with a tough question (his notorious interview with Dan Rather springs to mind), but let's face it, that's why he's famous - because the rest of the press is too lazy to pressure interview subjects. After I read his book, I was left with the impression that he is little more than a self important blow hard.

Although pigeon-holed as a conservative, he holds a variety of beliefs which wouldn't get him past a Republican primary in 96% of the States, and he added one more belief tonight when I happened to catch him on the TV while I'm the road (...looking for Cartoon Network). When talking about the evils being perpetuated by Katrina, inevitably he turned on the oil companies and said that price gouging (whatever that is) shouldn't be tolerated and that OPEC nations should be forced to sell their oil for $4 a gallon (since that's what he says it costs them to get it out of the ground).

This kind of red meat rhetoric might play well for the rubes, but it ignores many facts of how the universe works. The first is realizing what a 'price' is. A 'price' isn't the amount of money that someone charges, it's the price someone is willing to pay for it. This kinda ignores how the oil market, and any commodity market works. How would changing the price by fiat change this? Of course this would lead to shortages since the price would no longer reflect the supply.

A side story should illustrate. Post September 11th gas prices spiked up and the mayor of Cleveland put her indignation on display and said she would go after 'gouging gas stations'. The next day my Dem coworker came in and said she couldn't believe what the gas stations were doing.
Me: "Did you fill up your tank last night?"
Her: "Yes"
Me: "Did you need gas?"
Her: "no..."
Me: "Well, suppose gas was $5 a gallon. Would you have filled up your tank then?"
Her: "No"
Me: "So the price would have kept supplies available to those who really needed it. Suppose a member of my family was having a medical emergency and I had to travel some distance to get to them. I might not like paying $5 a gallon, but at least there would be gas to buy; as it is, there isn't."

This is no new story. It ends in black market goods for the price controlled product and lines for the product from legitimate sources. You can see this happening in of all places Iraq where fuel prices are heavily subsidized by the government and do not reflect reality whatsoever.

Of course Mr. No Spin made a double gaffe when he said that a) Americans should use less fuel starting now so that supplies are readily available AND the price should be lowered by fiat. Now, if the price for a good or service is lowered, does the demand for it go up or down, Mr. O'Reilly?

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