Mayor John Barrett is “livid” over the gouging we helpless citizens endure at the greedy hands of unscrupulous middlemen. He correctly observes that soon after gasoline’s wholesale prices rise, retailers raise prices at the pump, even though all of the gasoline in their tanks was already bought at lower prices. The Mayor calls this practice “gouging” and wants government to investigate and possibly do more.
This belief is frustratingly seductive; seductive because no buyers like paying higher prices – it is always fun to blame unpopular occurrences on business greed; frustrating because it is an oft-repeated canard with little appreciation for how the world actually works. Being a politician, the mayor’s grandstanding is not surprising, but it will not help his constituents’ economic fortunes one bit, for at least four reasons.
First, the cost of gas in the ground has no more to do with the price retailers charge their customers than does the price Mr. Barrett paid for his home has to do with the price he will ultimately sell it for. I believe Mr. Barrett’s suggested gas policies should apply to real estate taxes. Don’t raise taxes on the appreciation of the house just as you do not want the gas station to raise the price on his inventory, even though it has appreciated in value as well.
Second, what exactly does Mr. Mayor mean by “greed” or “gouging?” When is an alleged price gouger observed to be gouging? Will Mr. Mayor himself determine what is unreasonable, excessive, unfair, too high, and so on? Similarly, why are gasoline retailers picking this particular time and this particular place to be greedy? Were they not as greedy last week? In fact, given the disadvantaged rural location Mr. Mayor decries (i.e. we don’t have the luxury of mass transit), wouldn’t we expect to be even more exploited than we appear to be?
Third, even if there were some objective confirmation that Berkshire residents were being gouged at the pump, that situation is certainly preferable to being gouged by our local tax taking and spending authorities. When gas prices rise, consumers have countless means available to them to mitigate the financial burden, including carpooling, making fewer trips to the stores, driving more slowly, shoveling instead of snowblowing, and so on. Contrast this to the limited options I have when my property tax bill comes in. Notwithstanding the dramatic steps of leaving the county or taking aggressive steps to reduce the value of my home (such as knocking down a garage, turning a bathroom into a closet, and so on), I have far fewer ways to economize in the face of government price gouging. More dramatically, last time I checked, the proprietors of Cumberland Farms will not come to my house with a loaded gun to force me to buy gasoline, or have me imprisoned for not doing so. I’d like to see what happens when you try to reduce your “purchase” of the services that Pittsfield or North Adams is “selling.”
Fourth, Mr. Mayor in a typical display of deep thought, pulls off an age-old castigation of “middle-men” for exploiting us poor consumers. Sadly, why doesn’t Mr. Mayor similarly attack the hundreds of other retailers who behave as Cumberland Farms does every day and which he patronizes regularly? After all, his butcher charges substantially more for cuts of meat than it would cost him to buy meat directly from wholesalers. And the retail price of meats has been known to fluctuate as much as gas prices do. Would life be better if he launched full fledged investigations into the butchers? Would he be better off without butchers – where we would be obliged to buy entire steers or sheep, etc. – this would be moderately inconvenient, no? Are only the profits earned by gasoline retailers not “deserved?” I’ll remind Mr. Mayor that his distaste for retailing and his recommendations for “seeing how much profit they are making” are not a far cry from what the “bourgeois” retailers experienced under the thoughtful rule of Uncle Joe Stalin.
Adam Smith wrote, “the prejudices of some political writers against shopkeepers and tradesman, are altogether without foundation.” Sadly not much has changed in 232 years.