When looking at the ongoing disaster in New Orleans, a part of the discussion has to involve already constrained oil supplies. There have been large jumps in the price of gasoline in response to the disaster, but not as a result of it. That is because the gas you buy at the pump was bought months earlier at wholly different market prices. There shouldn’t be any immediate effect, but there is.

Some people, the President included, have called it price gouging. Others, like Mark Kleiman, call it market clearing, an economic principle that translates into equality of supply and demand. Basically, the price will go up to a point where it causes demand to drop to a level equal or below that of supply, thus preventing a shortage.

Technically they’re both right. However, looking a three dimensional problem from a one dimensional standpoint of economics alone is not only shortsighted, it’s inhumane. The alternative to “market clearing” is typically rationing, whereby everybody is alloted the same amount of that good based on supply. Rationing is absolutely essential for essential goods.

People need oil and gas to survive. With fall, and then winter, approaching, market clearing could just as well be called “let the poor people freeze to death.” Or, since the price of transportation is included in the price of goods for sale in a given local market, you could call it “let the poor people starve to death.” The point is that a civilized society cannot, and must not, allow the basic necessities of survival to be priced out of reach for any portion of that society.

P.S. I’m not doing to good on my decision to scale back on my political reading/posting. I’m still working on that.

P.P.S. Yes, I know I’m agreeing with Bush but I don’t believe in demagoguery. It’s important that you always stand up for what you believe. Besides, even Bush is bound to get something right given a long enough span of time.

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