Very often on this blog I criticize some ill-conceived government intervention as being bloated and/or ineffective and ill-conceived. A great example is corn-ethanol, where the government has spent billions and caused consumers to spend additional billions in higher food and gas prices, all for a technology that does nothing to reduce oil consumption or CO2 output.
Too often, I criticize these programs for being stupid and ill-conceived, which they are. But what I don't take the time to also point out is the necessarily narrow focus of these government actions. No matter how hard Congress works to stuff energy and farm bills with every micro-managing pork barrel project their campaign donors could wish for, Congress still only has the bandwidth to affect a tiny fraction of a percent of what a single change in market prices can achieve. Prices have absolutely stunning power of communication. When gas prices go up, every single citizen likely reassesses his/her behavior and spending in a myriad of ways. Thousands of entrepreneurs sit at their desk staring at the walls, trying to dream up business opportunities that these new prices may signal. And thousands of energy producers, from the tiniest to the largest, rethink their investment plans and priorities.