All The King's Men...

    “When I use a word,” Humpty Dumpty said in a rather scornful tone, "it means just what I choose it to mean – neither more nor less.”

Despite the victory lap press conferences Governor Cuomo and Senator Schumer held a few days after Hurricane Sandy made landfall, it became obvious to everyone that those who refused to let a good crisis go to waste had no idea what they were talking about or what they were doing.

In other words, they couldn’t put Humpty Dumpty back together again.

Short on common sense yet long on doublespeak, state and local officials were much quicker to point out how well they were working together than how fast they could get the power back. 

In fact, they believed that they worked together so well that within a few days after the crisis began Governor Cuomo announced that the long gas lines would soon disappear as barges of gasoline were about to make landfall. 

When the long gas lines refused to subside, the state apparatus swung into action and announced several measures designed to assert its control over residents and mask its incompetence in dealing with the crisis.

Now, I will borrow from the 19th century French economic philosopher, Frederic Bastiat, who originally taught us to look behind “what is seen.”

What Is Seen:  After several days of no power and long gas lines, state and local officials announced the implementation of a gas rationing system based on license plate numbers. 

By the time it was implemented, many gas stations had already come back online and received new deliveries, thereby clouding its intended effect.

What Is Not Seen: By the time it was implemented, many gas stations had already come back online and received new deliveries, thereby clouding its intended effect.

Had private gas stations owners been free to let prices rise in the beginning of the crisis without the fear of being indicted for violating the ‘anti-gouging’ law, supplies would have lasted longer and lines would have been shorter. 

In a crisis, the allocation of scarce resources is better left to the marketplace than to government officials who are trying to predict the future.

What Is Seen:  New York State Attorney General Eric Schneiderman recently announced that his office will be investigating several gas dealers who were allegedly taking advantage of the high demand by raising their prices to “unconscionable levels.”

What Is Not Seen:  If gas stations were allowed to raise their prices to reflect the higher demand (and the arduous task of pumping gas all night), the number of gas hoarders and tank “toppers” would have had a much more limited effect on the longevity of gas supplies.

What Is Seen:  In a blatant disregard for private property rights, Suffolk County Legislator Steve Stern (D-Dix Hills) sponsored legislation that would force private gas station owners to install backup generators so the public would be able to get fuel in the event of a blackout.

What Is Not Seen:   This increase in overhead cost would eventually be passed on to consumers, thereby creating the same higher gas prices the legislation was intended to prevent.

Also, what’s likely to happen is that many small gas station owners will choose to close up shop or balk at opening new gas stations because of these new requirements.  In other words, coercion is a poor way to increase supply.

Lesson Learned

The lesson to be learned from this crisis is that no government initiative can efficiently allocate scarce resources without having unintended side effects – which usually end up being worse than the problem that was supposed to have been solved in the first place.

The real solution to allocating scarce resources in a crisis is letting the market function unimpeded. 

That would require politicians to keep their blue fleeced press conferences, demagoguery and legislative fiats to a minimum. 

But, don’t hold your breath waiting.

Solutions

Here’s a couple of possible solutions that should be discussed by state lawmakers before the next crisis:

• Repeal New York State’s ‘Price Gouging’ law and let the marketplace allocate fuel and set prices according to supply and demand. 
• Take away LIPA’s government sponsored monopoly of the electric grid and make them compete for customers on the same pole the way Verizon and Cablevision compete.
• Stop the regulation that would require fuel suppliers to purchase generators.
• Loosen regulations so that out of state suppliers can set up temporary, mobile filling stations where needed during a catastrophe.

Conclusion

State and local bureaucracies will never let a good crisis go to waste and using such catastrophes as Hurricane Sandy for photo ops and power grabs is disgraceful. 

In the end, every ounce of power we give to the government in hopes of solving a crisis is an ounce of power the citizens will never get back when the crisis is over.