Recently I’ve been listening to Basic Economics 4th Ed: A Common Sense Guide to the Economy by Thomas Sowell as I drive to and from Idaho and on my commute into Seattle. One of the lessons was that if prices are fixed by the government you will have problems.
If the prices are fixed too low it results shortages, poor quality, and under the table payoffs to suppliers and/or government price control enforcement agents. If prices are fixed too high it results in surpluses, wasted resources, less efficient means of producing the product (no incentive to reduce costs), and a heavier tax burden. Letting the free market adjust prices dynamically results in much closer to optimal allocation of scarce resources with alternative uses.
This lesson has been known for decades, if not a century or more, but politicians have no incentive to adhere to the laws of economics.
Via email from Ry we have the further proof that the laws of economics cannot be violated without suffering known punishments:
A federal power agency discriminated against wind operators in the Pacific Northwest when it unplugged their generators to cope with a surplus of renewable energy on its transmission system this year, the Federal Energy Regulatory Commission ruled on Tuesday. It ordered the agency, the Bonneville Power Administration, to rewrite its rules.
Bonneville had argued that it had no option but to lock out the wind generators to protect salmon in the Columbia River.
While the agency could have reduced the power output of hydroelectric dams by routing excess water through a spillway, doing so would violate the Clean Water Act and the Endangered Species Act, it said.
But a group of wind companies filed a complaint with the energy regulatory commission saying that instead off turning off wind turbines, Bonneville should have resorted to “negative pricing,” or paying customers to take the excess power. Bonneville countered that this would conflict with its obligation to repay loans from the federal government and to provide power cheaply.
The problem could crop up more often as companies build wind and solar farms to meet state requirements for renewable energy.
We need a Constitutional amendment that guarantees freedom of commerce. That would have prevented the health care bill, the war on drugs, subsidies for farmers, and the $200 tax on firearm noise suppressors as well as crazy stuff like people advocating “negative pricing” for electrical power.