Obama resisted enormous political temptation to score a cheap one on gasoline prices today, while Clinton went in the tank. Yay for him, and too bad for her. This round began when McCain floated the insultingly dumb idea of suspending federal gasoline taxes over the summer. This was just another piece of idiocy coming out of his policy closet of howlers, as McCain is rapidly abandoning any standing as a serious person in this election. Still, it meant Obama and Clinton had the chance to do the right thing, and Hilary blew it.
The ease with which politicians say “gas prices are too high” combines their cowardice (or cynicism and irresponsibility, or maybe just ignorance) with a widespread confusion of price with cost in the public mind, one for which we educators probably have to answer though a supine and feckless press isn’t helping at all. The distinction is no piece of technical arcana, but one of the most fundamental keys to getting policy right, and in this case, a very big batch of policy with enormous consequences. If you don’t understand the difference, you do what Hugo Chavez does and suppress the price by enormous public subsidies. Unfortunately, the cost of anything is quite independent of what we want it to be, or the price at which it is offered, because cost a reality sort of thing, the value of the economic resources consumed in providing it. If you call a dog’s tail a leg, it still has four legs, because calling a tail a leg doesn’t make it one. If you lie about the cost of gasoline, or anything, by offering it for sale at an arbitrary price, the cost doesn’t change, but the behavior of everyone gets crazy with very bad consequences.
Price and cost can drift apart for many reasons, of which direct meddling by incompetent authority is only one. Sometimes the cost of goods includes resources that the producer doesn’t have to pay for, or that aren’t traded in markets, so their price misrepresents their real value in the way market goods prices usually don’t. The global warming and local pollution costs of burning gasoline are not reflected in what refiners pay to get gas to the pump (even including the tax intended to build the roads that make cars worth having), so the US price of gasoline is not too high but too low, probably about half what it should be. “Should be”, meaning “what would tell consumers the real cost of using it.” “Should be”, not meaning “what people want it to be, as long as they can pretend reality will be suspended”.
When a candidate takes risks that position him to be a better official if elected, and tells voters the truth instead of enabling our worst habits of magical thinking, he gets props in my book and should in yours. Not to mention another scoop of money .