Pricing mechanism did its job during California gas shortage – you could get gasoline if you wanted it

The recent gas shortage in California is a superb illustration of the idea that if you don’t meddle with prices and just leave them alone, they will communicate to everyone how scarce a resource is. The natural and expected result is that people who want the resource can get it.

Prices worked

The recent gas crunch shows what happens when you let the market work. Prices spiked because of a supply crunch. People who didn’t really, really need gasoline held off on topping their tank. People who really, really did need gas could get it.

Two things prove this to me.


Spotting wrong questions

“The uncreative mind can spot wrong answers, but it takes a very creative mind to spot wrong questions.” 

–Antony Jay,  British writer, broadcaster, director and actor

I’m planning to use that quote in several posts I want to write soon, so I will put it here to have it on the table.


Prices have information – they drive buyers and sellers

I can’t explain all the economics lessons in the following joke, but can tell there are many.  Funny thing about prices is that they motivate buyers and sellers.  Prices contain a lot of information.  We need to interpret them well.  Here’s an insight on pricing and human behavior:


A woman walks into a butcher shop and asks the butcher how much a pound of tenderloin is.

“$12 per pound,” replies the butcher.

“Are you sure? That can’t be,” says the lady.


“I, Smartphone” – it takes millions of people and thousands of inventions to make a smart phone

Millions of people work together to build that smartphone you are using. No one person has the know-how to build it. Thousands of inventions were needed before making the first one.

I, Smartphone”, from the Institute for Faith, Work & Economics, is a superb visual explaining the long supply chain and incredible range of skills needed to get that phone into your hands.


The link if needed:

This is an update of the classic “I, Pencil”, which I mentioned here.

No one person has the skills


"I, Pencil", or, how many millions of people does it take to make one pencil?

No one person on the planet has all the knowledge or skills necessary to make one pencil. It takes multiple millions of people contributing their specialized skills just to make one.

That story is told in “I, Pencil: My Family Tree as told to Leonard E. Read”, which you can find here.

I’ve long been aware of that article, but am embarrassed to admit I’ve never read it before today.

It is brilliant.

Here’s the core idea:


How government could make the massive transition in the economy easier

Walter Russell Mead is developing a picture of what the new economy might look like.  Most recent post is Beyond Blue 5: Jobs, Jobs, Jobs

That we are in the midst of a massive change in the whole economy has been obvious for a while.  All the rules have changed.

What does this change look like?

The music, newspaper, and manufacturing industries are painfully aware of this.  It is dawning on the publishing industry and the post office that the tidal wave of change has hit them.  Primary education, higher education, and government at all levels haven’t caught on.  I’m not sure where the CPA industry is at.

My opinion, shown clearly on this blog, is that our future is so bright we need sunglasses now.

At the same time, the transition will be terribly painful. Massive changes are needed to make the shift.

One huge area needing change is in the heavy hand of government regulation. Mr. Mead opens his post with:


Reshoring – huge opportunity if we want it and a skill-set challenge we can overcome

Manufacturing jobs keep coming back to the U.S.

Mark Perry points to an article in Financial Times, Business returns to US as Asia loses edge (free registration required).

Rapidly rising wages in China are changing the equation on where it makes sense to locate plants.  Here’s what that picture looks like, in a comment from Mr. Bruce Cochrane, who opened up a furniture plant in North Carolina. The FT article says: