The Pros And Cons Of 'Price Gouging'
As gas prices rise a coalition of Democratic governors, including New Jerseys John Corzine (left), have issued a letter to President Bush urging him to support legislation working its way through Congress that would prevent price gouging at the pump and help them pressure oil companies into reinvesting profits to increase their capacity.
"We are investigating price gouging, investing in alternative sources of energy, and rolling back oil and gas subsidies," the governors wrote. "We support corporate profitability -- but not on the backs of working families and not at the obscene levels we have seen in recent months."
On the other side of the fence, right-leaning economists are arguing that if government really wants to cut back on gas prices it should lower the gas tax, and that this legislation will simply create price controls that will lead to gas shortages.
Never mind that price gouging isn't even possible with gasoline stations seemingly on every corner. To avoid price gougers customers need only drive down the street to the next gas station. Imposing implicit price controls on gasoline through price gouging legislation will have the same effect as explicit price controls -- shortages and gas lines. Instead of readily available gasoline at $3 per gallon, there will be no gasoline at any price. That's an infinitely higher price than we are paying now and one Americans will not stand for," said Dr. Paul Georgia, chief economist for the Frontiers of Freedom Institute.
Read the full letter [here].