Recently, the so-called "reality-based community" on the left has developed the theory that US oil companies have purposefully dropped gasoline prices from over $3.00 to $2.00 a gallon solely to help Republican re-election prospects in November. This notion is so insane as to be, well, insane, and I am not even going to bother fisking it any more than I would bother refuting a flat-earth hypothesis. OK, I can't resist, here are two quick arguments, by no means comprehensive.
- US oil companies control a minority of world oil supplies, and those folks who do dominate the market (Hugo Chavez, Iran, the Saudis, the Russians) are highly unlikely to be cutting Bush much slack.
- The implication is that either the old, high price or the current low price is somehow an unnatural contrivance. If the higher price was a contrivance, ie above the normal market clearing price due to some collusion, then we would have been swimming in oil as supplies outstripped demand, and inventories would be overflowing. If the current lower prices are a contrivance, then demand should outstrip supply and we should have lines at every gas station. Of course, neither situation has been observed.
So here is this week's message for the Left: Economics is a science. Willful ignorance or emotional rejection of the well-known precepts of this science is at least as bad as a fundamentalist Christian's willful ignorance of evolution science (for which the Left so often criticizes their opposition). In fact, economic ignorance is much worse, since most people can come to perfectly valid conclusions about most public policy issues with a flawed knowledge of the origin of the species but no one can with a flawed understanding of economics.
Postscript: In fact, the more I think about it, the more economics and evolution are very similar. Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems. And, in both cases, there exist many people who refuse to believe such complex and beautiful systems can really operate without top-down control.
For example, certain people refuse to accept that homo sapiens could have been created through unguided evolutionary systems, and insist that some controlling authority must guide the process; we call these folks advocates of Intelligent Design. Similarly, there are folks who refuse to believe that unguided bottom-up processes can create something so complex as our industrial economy or even a clearing price for gasoline, and insist that a top-down authority is needed to run the process; we call these folks socialists.
It is interesting, then, given their similarity, that socialists and intelligent design advocates tend to be on opposite sides of the political spectrum. Their rejection of bottom-up order in favor of top-down control is nearly identical.
Update: From Cafe Hayek, letter to the Washington Post
that today's falling gasoline prices result from a fiendish plot to
keep the GOP in power, Kenneth Jones is certain that "gasoline prices
will go right back up to $2.75-plus after the [November] election"
(Letters, October 2).
If Mr. Jones is correct, he can make a
financial killing. All he need do is to invest all of his assets going
long in gasoline futures (which are today about 30 percent lower than
they were in late July). Indeed, he ought even to cash out all the
equity in his house, max out on his credit cards, and borrow heavily
from his brother-in-law so that he can invest as much as possible in
He can then contribute his post-election financial bounty to the Democratic National Committee.
Donald J. Boudreaux