Price Controls and Rationing

In a recent Gallup Poll, Americans by a margin of 53% to 45% favor price controls on gasoline. Ironically, Americans prefer not to have rationing of gas by a margin of 79% to 20%. Now this result shows a couple things. One, the American education system is failing to educate students on some very basic economic principles, and two that people truly do not understand that prices play such a vital role in our economy.

Prices are really the mechanism used in a capitalist system to ration products that are scarce. In the capitalist system, people make choices that effect their wealth (and some actually win the genetic lottery, i.e. Paris Hilton). They then use their wealth to decide what products and services they will purchase with their wealth. So people ration themselves with their money.
No system, not even capitalism, ensures EVERYONE gets EVERYTHING they desire. A few people might, but not everyone.

So when the government decides to put price controls on any good, there will be some manufacturers that cannot produce the good for that price. As a result, that supply will not be available on the market for sale (at the controlled price) because the producer would lose money. Now if demand for a good is higher at the controlled price than the supply of a good at the controlled price there will be a shortage. This is also known as the long gas line. Some people at the front of the line will certainly benefit from cheap gas, but others farther back will either spend a lot of time waiting, or find the tanks are empty once they reach the front of the line.

Coming back to the Gallup result for a moment shows us that Americans want prices below market, but not government rationing. Quite frankly, this is impossible. Prices ration goods and if the prices are controlled, the rationing is screwed up. Some people will get more than others based solely on when they get to the gas station. I can just envision people stalking gasoline tankers to see where they are heading.

I hate paying $4 for gas just like 99.9% of the population. However, I also value being able to choose what I buy when I want to buy it and ration myself. If the government controls the price of gas, the price of gas will remain the same without a doubt. While the per gallon price may drop, other costs will not. For instance the cost you incur waiting in line, paying someone to wait in line for you, running out of gas waiting in line, running out of gas on a trip because the gas station is out too, etc. will certainly not make gas cheaper.