Alan Reynolds

California Lt. Gov. Cruz Bustamante is campaigning for his boss's job with the logically impossible theme of "No on Recall, Yes on Bustamante." Until very recently, there was no visible difference between the policy plans of Davis and Bustamante -- i.e., to tax and spend with abandon. But now there is one big difference. And that difference reveals that Bustamante is, remarkably, even more incompetent than Davis when it comes to dealing with economic problems.

It turns out that Bustamante wants the state constitution amended to allow public utility regulators to set the price of gasoline. He would have to get the U.S. Constitution amended, too, because of the pesky "interstate commerce" clause that prevents one state from declaring economic warfare on the others. But neither law nor economics gets much attention in Sacramento these days.

Critics of Bustamante's proposal were quick to point out that President Nixon tried price controls in the early '70s, and the most memorable result was endless waiting lines for gasoline. Unfortunately, that is like asking Californians to recall how badly price controls worked under Diocletian during the Roman Empire. After all, a fourth of Californians are foreign born and half are under the age of 33. Most Californians have no idea what life was like under price controls from August 1971 through April 1974.

Anything scarce and valuable has to be rationed by price, or by waiting lines, or by political officials deciding who gets what. When politicians refuse to let the price system do the rationing, then bureaucrats get to do it. It must be great fun to have the power to decide who gets to be first in line. It is much less fun for those with less political influence, who invariably get shoved to the back of queue.

Following some noisy protests by truckers and farmers, Nixon's officials quickly instructed the refineries to divert more oil into making diesel fuel and less to gasoline. An affluent friend who owned a gentleman's farm in Connecticut and drove a diesel Mercedes couldn't imagine why I was so bothered waiting for gas.

The reduced supply of gasoline then had to be allocated among gas stations in some way that sounded fair. The amount of gasoline a dealer was entitled to was therefore determined by how much the station had sold in 1972. So the gas went to where people had been traveling when fuel was abundant and cheap. Fearing an inability to refuel, however, people naturally stayed close to home.


Alan Reynolds

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