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Jewish World Review May 16, 2001 / 23 Iyar, 5761

Thomas Sowell

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The high cost of demons

http://www.jewishworldreview.com -- SINCE it has long been known that the best defense is a good offense, it should not be surprising that politicians who have created an economic mess should begin loudly denouncing somebody else as the cause of the public's problems. Last year, the problem was a sharp increase in gasoline prices in California and in the midwest. Immediately the demonizing of Big Oil began.

Just as a matter of plausibility, it would seem that if Big Oil -- or anybody else -- were going to be "greedy," they would not arbitrarily confine their greed geographically. What was different about California and the midwest?

In both regions, politically imposed requirements for additives increased the price of the gasoline. Moreover, when supplies ran low in these regions, gasoline could not be brought in from other regions because it did not have the special additives required in California and the midwest. These additives were supposed to reduce air pollution in areas where that was a special problem.

Why didn't politicians stand up and say something like: "Folks, we take responsibility for the high prices and gasoline shortages because this is the price we are willing to pay for cleaner air"? Why not? Why don't whales fly? It is not in their nature.

Instead, we heard cries of outrage that Big Oil was doing something nefarious, if not illegal. There were demands for an "investigation" to "get to the bottom of this." But the purpose of such rhetoric is not to get to the bottom of anything. What such talk does is point the finger of suspicion at somebody else.

Just recently, the Federal Trade Commission completed its report on the investigation that they began last year. Conclusion: No evidence that last year's gasoline price increases were a result of any illegal activity by oil companies. But, while the wild charges made front-page headlines last year, this year's factual FTC report was buried deep inside the newspapers. That is why politicians can get away with playing these kinds of games.

The same game is now being played with California's electricity crisis. Anybody who understood Economics 1 could have told the politicians that arbitrarily putting caps on electricity prices and micro-managing how the electric utilities operated was a sure-fire guarantee of bad consequences. They may even have known it themselves, but just couldn't resist a chance to play knights in shining armor, riding to the rescue of the distressed consumers.

When the bad consequences -- in the form of blackouts and bankruptcies -- came quicker and bigger than the politicians were ready for, the obvious answer was to point the finger at somebody else and demand "investigations." For a state official, the ideal villain to blame is somebody out of state. Not surprisingly, California's Governor Gray Davis has denounced "out-of-state profiteers" as the cause of California's problems.

This theme has been echoed by others. "We pay more for gasoline. We pay more for natural gas. We pay more for electricity than anywhere else in the country," according to one bureaucrat. "I can't think of a reason except we're California and they are taking advantage of us."

It is hard to believe that a grown man said something so childish. Yet lots of grown men, and grown women too, are saying very similar things in the course of California politics. Actually, there are lots of reasons why so many things -- including housing -- cost more in California. Chief among them is a refusal to take adult responsibility for the huge costs that are blithely incurred and blithely disregarded in pursuit of one politically correct goal or another.

Nobody wants polluted air, whether they are liberal, conservative or whatever. But not everybody is prepared to go charging off in all directions for something that promises a reduction in air pollution, without wanting to know how significant a reduction and at what cost. Unfortunately, California politicians play to the green gallery. That is what drove up the price of gasoline last year and led to loud denunciations of Big Oil and angry calls for them to be investigated by the FTC.

This year's designated villains are the electricity suppliers. How long will it be before they are exonerated -- and how many needless blackouts and huge losses of businesses and jobs will California suffer in the meantime -- and for years thereafter?

JWR contributor Thomas Sowell, a fellow at the Hoover Institution, is author of several books, including his latest, Basic Economics: A Citizen's Guide to the Economy.

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© 2001, Creators Syndicate