Government should send “price signals” on energy?

posted at 8:30 am on November 1, 2008 by Ed Morrissey

Just in case voters didn’t figure out Barack Obama’s economic instincts towards statism, this interview from 2007 on energy policy should open a few eyes.  During the Democratic primaries, Obama had a lot more openness about his desire for top-down control of the economy, especially when it came to energy.  In order to change the behavior of consumers, Obama argued, the government had to send “price signals” to deter bad decisionmaking … at least according to the Bureau of Acceptable Consumer Choices:

Q: How do you convince people to change their lifestyles, to live differently, or to turn the question on its ear, are voters ahead of the politicians on this stuff? Do they get it, and maybe the politicians don’t?

A: Well, I think, uh, I think voters do understand it. I think it is important for us to send some price signals to change behavior.

Is that the function of government — to fix prices as a punitive measure to change consumer behavior?  It will be in an Obama administration.  He and a few elites will decide which consumer behaviors are bad, and penalize it with price signals.  That usually means taxes or tariffs that drive the cost upwards.  I’d guess that Obama isn’t celebrating the fact that a gallon of gasoline will likely fall below $2 per gallon sometime this week.

When have we seen government send “price signals to change behavior” before?  Oh, yes — in the lending markets.  When government wanted more loans given to risky borrowers for political purposes, they sent “price signals” to lenders by having Fannie Mae and Freddie Mac buy up tons of subprime paper, and then mandated their conversion to securities to send “price signals” to investors.  How did those “price signals” work out for taxpayers, consumers, and investors?

We’ve already had enough “price signals” from government to last a lifetime.  We need government to get out of the “price signals” business and get back to normal regulation.  Barack Obama revealed himself in this interview as the kind of politician who wants to manipulate markets for his own political ends, and is clueless about how disastrous those actions will prove.

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Why attack Obama when he’s saying sensible things? It’s Econ 101 that if there are externalities to fuel usage, then the government should tax fuel usage or “send price signals”. We can debate climate change, but if we assume climate change as Obama does, then he’s simply correct in what he’s saying.

For that matter, I would not characterize what happen in the housing market as the government manipulating price signals. It was bad regulation to be sure, but it was not the blatant tax or subsidy in the sense Obama has in mind when discussing energy. Tobacco taxes are a much better example of price signals.

thuja on November 2, 2008 at 11:51 AM

No attack on this. I think the American people sent a pretty good signal already by conserving. Tankers are lined up the bay as they can’t sell it fast enough. Shipping can’t leave the fields until those tanker return so, I’d say we’re doing a fine job and to keep it up. Where I am, gas is 2.21 at last check and falling. We’re making them eat their oil. I’m say keep it up until its 1.50 a gallon.

johnnyU on November 2, 2008 at 12:19 PM

We need government to get out of the “price signals” business and get back to normal regulation.

Uh, Ed, normal regulations, non-normal regulations, poofy-woofy regulations, any regulations ARE “price signals”.
For evidence, I proffer The Community Reinvestment Act.
Oh, and BTW, how is the government doing with regulations these days? Ever hear of Cost of Government Day?

Amendment X on November 2, 2008 at 3:29 PM