Posted on 04/28/2006 5:52:22 AM PDT by Gordongekko909
One of the beauties of an economy coordinated by price movements is that nobody has to understand it in order for it to work.
If vast new iron ore deposits are discovered tomorrow in Timbuktu, 99 percent of the people on this planet may be wholly unaware of it -- and yet the prices of everything from paper clips to automobiles would begin to decline, from Singapore to Seattle. Moreover, people around the world would adjust their behavior in response to this event that they know nothing about.
Many people who were not sure about buying a new car might decide that they could now afford one at the new lower prices. People who were thinking of buying wooden desks could begin to reconsider, when they discovered that steel desks had become much cheaper than they expected.
In short, the whole world would adjust their economic behavior in response to a discovery that most people were wholly unaware of.
This economic benefit of price-coordinated markets is also its biggest political vulnerability. If people don't understand what is happening, politicians can tell them anything -- and get their support to take actions that look good, even when the consequences will be counterproductive.
(Excerpt) Read more at townhall.com ...
The same thing happens if crude oil prices drop: the oil companies suddenly have to sell gasoline at a loss. The amount that they're paying for the crude will eventually catch up to the price at the pump, but there's a short-term loss.
So yeah, an even better read than usual.
Ping coming in a few hours; I'm typing this from a different computer than the one that I have the ping list saved on.
Our leading pols have made it abundantly clear in the last week that they have no idea how the market economy functions.
Almost right - more like,
"Our leading pols have made it abundantly clear in the last week that they are well aware the 95% of the US voters have no idea how the market economy functions. "There are plenty of people (envious stupid ignoramuses) who post on this forum who have made it clear that they are clueless when it comes to supply and demand.
From my observations, more understand than don't. 'swhy we're here.
I will be sharing Prof. Sowell's article with my Microeconomics students. I raised many of these same points in a class discussion last week. However, I don't expect to make much headway on this topic with my wife (also a college professor) who rants about "obscene" oil company profits whenever she fill her car with gas.
(Denny Crane: "Every one should carry a gun strapped to their waist. We need more - not less guns.")
Obvious knows nothing. Suspects nothing.
"How far will your car go on that gallon of snake oil?"
Not to mention the posters on this site.
FRmail me if you want on or off the Thomas Sowell Ping List.
See if the MSM carries any stories about oil companies losing money, for the exact same reason they're making lots of it now, if crude prices suddenly drop. And then see if your wife cares.
Taking Microeconomics in college was right about the smartest thing I ever did. A little bit of economics knowledge, especially if it comes from a professor who knows how to teach it, will change the way you think forever.
REDUNDANT!
REDUNDANT!
LOL ........... certainly!
PING!
Exactly.The secret of price economics is the nature of money. Money is entries in bank accounts, or numbers on paper in your wallet. Money is information. The money in you checking account is, roughly speaking, the product of the price (bid) you have been able to command for your work, times the amount of work you have done - less all the money others have been able to command from you for providing you with food, shelter, and the rest of the things you consider essential or valuable. Yes, including gasoline and other fuels.
Money is numerical information, just as prices are. Prices are influenced by not only by supply but by demand. Notwithstanding the finite supply of my excrement, nobody has yet bid the price of it up to $100/pound. Perhaps that situation will change in future; prices do change when circumstances change. For example, it might be understandable that the price of fuel should have risen if the Indians and the Chinese are, taken together, now using as much oil as we ourselves (greedy absorbers of resources as Al Gore then styled us with our internal combustion engines in SUVs) used as recently as ten years ago, smack in the middle of the Clinton Administration.
Congress can hold hearings if it wishes, but it need not expect to persuade me that censorship of the facts - which is what "price controls" attempt to do - can make fuel more plentiful when worldwide demand of fuel is rising. Congress cannot make fuel, and the people who do - the oil companies - do so despite not because of Congress, and because of rather than in spite of the free communication mechanism known as market pricing.
Leftists are also working on outlawing gravity. Do you know how much fuel a commercial jet has to burn to overcome gravity? Once gravity is outlawed, they will no longer have to deal with this problem. Of course, the eeeeevilllll Republicans, who are in the pockets of Big Gravity, would never allow such legislation.
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