One of the more remarkable economic events of the year thus far was the response by economists to Vice-President Gore’s claim that “Big Oil,” that collusive, price-gouging maker of “enormous and unreasonable profits,” is responsible for rising gas prices.
Gore’s claim got economists buzzing about like hornets whose nest had just been swatted. They swarmed think tank fora and newspaper editorial pages with essays debunking the Vice-President’s economics while carefully explaining the real reasons for rising gas prices. The economists’ analyses were as excellent (see especially Mises.org on Oil) as their quick and spirited response was inspiring.
The Vice-President’s economics is certainly bad economics. Professor Steven Landsburg’s suggestion, made in a recent Wall Street Journal commentary, that Gore would flunk Econ 101 is an understatement of gross proportions. But there is more to the Vice-President’s explanation of rising gas prices than just bad economics. For Gore is not a student trying to pass Econ 101. He is a politician running for political office.
Gore’s claim illustrates one of the most important lessons that good economics has to teach: government intervention is political intervention, and when government intervenes, political considerations swamp all others.
Gore is after political power. To him, the price of gas is a political phenomenon, not an economic phenomenon. He doesn’t care if he gets the economics right. He’s not trying to provide a sound economic explanation of rising gas prices. Al Gore wants the top job in the government, and he’ll say whatever he thinks needs to be said to get it. If sound economic reasoning serves his purpose, he’ll use it; if not, it’s to be brushed aside.
His charge of conspiracy and price-gouging is spin. Spin is the political class euphemism for calculated mendacity, for planned distortion, for twisting and contorting fact and reason until truth becomes all but impossible to decipher. In the normal world, spin is thought of with disgust. But in the political world, spin is a tool, and the handiest tool at that; and those who use spin with skill rise high in politics.
He has made a political calculation that bad economics is good politics. It’s a calculation he consistently makes. We can only hope that it’s the wrong calculation this time, but there’s no question it’s a calculation that has served him -- and so many other politicians -- quite well on many other occasions.
Why would bad economics ever be good politics? Bad economics is always good politics whenever the anti-capitalist mentality is alive and well and firmly entrenched in the minds of a large number of voters.
The anti-capitalistic mentality, described by Mises in his short book by that name, is born of misguided sentiments.
It is born of envy and resentment of those who excel in a system that rewards a person not according to some absolute standard of justice (to be defined by whom?), but according to his ability to cater to the preferences and desires of buyers in markets.
It is born of fear, of the bizarre belief that more liberty means less security.
And it is born of economic ignorance. It is born of the belief that a person can only gain from market exchange at some other person’s expense. Hence, profits are the fruits of exploitation.
The anti-capitalist mentality is also born of what Henry Hazlitt called an “impatience for a cure” -- the childish optimism that pressing problems, no matter how complex their dimensions, have quick and simple solutions.
Gore’s explanation of rising gas prices is a loaded appeal to the misguided sentiments of the anti-capitalist mentality. His explanation amounts to this: “Powerful oil corporations are exploiting consumers with high prices. They are gouging profits out of the skins of consumers, who are helpless in the anarchy of the free market, a system that sets economic gangs such as Big Oil free to roam and assault the economically weak. Something must be done.”
Something must be done by government, that is. In their impatience for a cure, those with an anti-capitalist mentality turn immediately to government. The impulsive call for government intervention and the absurd but unbounded faith in government’s ability to cure economic ills are further misguided sentiments of the anti-capitalist mentality.
No one better described just how misguided these sentiments are than Murray Rothbard (in Power and Market): “It is curious that people tend to regard government as a quasi-divine, selfless, Santa Claus organization. Government was constructed neither for ability nor for the exercise of loving care; government was built for the use of force and for necessarily demagogic appeals for votes.”
Rothbard’s observation shows the bad economics of Gore for what it really is. His bad economics is a political tool. It’s a tool he’s using to stir up the misguided sentiments of the anti-capitalist mentality to get himself elected. And it’s a tool he’ll use again if he is elected.
The anti-capitalist mentality invites government intrusion, which enhances the power of the political class. Sound economic reasoning, on the other hand, advises sharp constraints on the size and scope of government. That hardly serves the political class, people who, like Gore, yearn for power over others.
In light of the politics behind his explanation of rising gas prices, the economists’ response to his explanation is all the more important. If their response helps to ensure that bad economics is also bad politics, their efforts are worthy of much praise.
