Market ensures fair resource use

The recent increase in the price of gasoline has had many
ensuing effects. The governments of Texas, Alabama and Illinois,
among others, have recently investigated firms accused of engaging
in “price gouging.” The increase in oil prices has also
reopened debates regarding whether Congress should allow drilling
for oil in Alaska.

One would be hard-pressed to find defenders of price gouging and
advocates for environmental destruction. Yet the rubbish that is
inevitably unearthed whenever these issues are discussed
necessitates that one separate fact from prevalent myth.

During a time of crisis, vital necessities ““ often taken
for granted during normal times ““ suddenly become unusually
scarce.

Nevertheless, the problem of resource scarcity is ubiquitous.
The economy is not ordinarily driven by a sense of
“fairness.” Rather, the greed of individuals provides
the motivation that ensures that the economy runs smoothly.

The beauty of capitalism is that it makes no assumptions as to
the charitable intentions of either buyers or sellers; the
incentive to maximize the value of privately owned property plays
an important role in deterring a waste of resources. It is human
nature to treat one’s own private property more carefully
than that belonging to others.

Opponents of price gouging fail to recognize that a higher price
results from a virtual auction between potential buyers. If the
sellers of gas, or any other good, could not find willing buyers at
a given price, they will predictably lower prices until they are
able to find buyers. In fact, price adjustments are precisely how
resources are utilized most efficiently.

Emergency situations are not unique; they merely provide a
glaring example of the fact that all resources are ultimately
scarce, due to the fact that they exist in finite quantities.

When sellers charge higher prices for gas in the case of a
shortage, they do it not out of some desire to exploit the
devastation of others, but from the same motivations that propel
trade in ordinary situations. Similarly, the rise in prices
corresponds to the relative scarcity of the resource.

Politicians who seek to prevent sales that both the buyer and
seller desire ““ such as in the case of illegalized price
gouging ““ actually prevent the efficient allocation of
resources. This intervention hurts both the buyer and seller who,
by acting voluntarily, each act in their own interests.

Cost in economics is defined as the value of an alternative use
for a particular resource; the cost of preserving the Alaskan
wilderness is the value of gasoline that could be pumped from the
region.

Obviously the preservation of Alaskan wilderness is of some
value to society. Nevertheless, environmentalists would have us
ignore any cost resulting from environmental preservation.

But ignoring the true and increasing cost of preservation in the
face of increasing gas prices benefits nobody.

Extreme ideas such as protecting the environment at all costs
provide the basis for some of our more harmful governmental policy.
As gasoline prices soar, so does the cost of preventing drilling in
the Alaskan wilderness. The present debate over drilling in Alaska
should be viewed in this context.

The problem in this case ““ the under-utilization of
resources ““ results from the fact that property rights are
poorly defined; the land in Alaska belongs to everyone and no one
at the same time. If the wilderness were privately owned, it would
be used in a way that best benefits the country.

Both the cases of so-called price gouging and Alaskan wilderness
make clear that private property rights, not bureaucratic meddling,
provide the basis for utilizing resources efficiently.

Those who dedicate themselves to wailing about
“fairness” ““ whether environmental or social in
nature ““ are often the very same people who propagate
injustices themselves, by advocating wastefulness that affects us
all.

Lazar is the vice chairman of Bruin Republicans.