Supply down, price capped, then what?

French trade unions, using their state-provided, state-protected privileges, are boycotting some of France’s fuel depots. Many service stations have run out of petrol and diesel. Road users who need more petrol (for example taxi drivers or commuters) are prohibited from increasing the price of petrol to divert it from less essential demand: the market is a continuous and silent auction. How is this ban established? Gasoline and diesel prices in France are regulated by a government formula based on accounting costs.

So what happens? A first year economics student should be able to answer immediately: A deficit is created. “Scarcity” means that the quantity demanded is greater than the quantity supplied at the legal price, and during periods of cut-off or unsatisfied demand, cost rationing replaces the market price of demand.

The evidence is clear, but many don’t understand the reasons for what’s happening (“France battles to avoid winter of discontent after fuel strike chaos.” financial barOctober 14, 2022):

In the northern French city of Dunkirk, near a huge fuel depot that has been on strike for the past three weeks, shortages at petrol stations have become so acute that taxi driver Saeed Fertakh has seen his earnings drop as he tries to find somewhere to fill up. on top of his car.

“It’s becoming a struggle,” said Vadiyakh after entering a newly replenished station, where there was a long line of trucks and other motorists. “I spent an hour in a row last week. I had to say no to some customers because I had to find somewhere to fuel.” …

Other consequences follow from the regulation of prices and production and its quantity:

but [the government] Few this week resorted to using legal orders to send some critical fuel workers back to depots. The move was sharply criticized by the unions and led the CGT to extend its strike to other refineries.

“We seem to be going back to the time of masters and slaves, where you have to work, you have no other choice,” said Benjamin Tunges, CGT representative for Total Depot near Dunkirk. …

Striking workers can face up to six months in jail and fines if they do not obey the so-called requisition order.

Of course, no one is forced to work at an oil company and go on strike (in France, trade unions cannot prevent their members from reporting to work during a strike). The CGT representative is right behind it. CGT (General Confederation of Labour) a trade union, formerly of communist allegiance, now simply socialist. They obviously haven’t read Friedrich Hayek’s 1944 book The Road to Serfdom, which explains how a state (or its trade-union agents) with central-planning powers must decide what to produce and impose a “mere redistribution” of income to direct workers to imperfect work. And how to ensure that what the consumers (or the government) want will be produced in the right amount? Hayek quotes Richard Acland, founder of the socialist British Commonwealth movement:

It must be the community as a whole that decides whether a man is to be employed on our resources and how, when and on what he shall work.

in his book Capitalism, Socialism and DemocracyJoseph Schumpeter, who apparently believed that socialism could replace capitalism, suggested that, in an ideal socialist system,

A strike will be a rebellion.

We should pity the poor man who does not have the theoretical tools, or the practical experience to properly interpret, to understand not only what economic planning entails, but, more simply, what happens when supply is reduced and prices are constrained. He sees the lack of results as the work of God or some greedy capitalist or leviathan who does not act to protect him at the expense of others. And he should try to teach elementary economics. James Buchanan is perhaps right that maintaining a free society requires individuals to understand “the simple principles of social interaction,” which includes “a common sense of basic economics”; Otherwise, they should be willing to defer to those who understand.

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