My Crystal Ball Knows All

Back in August of 2005 Hawaii decided it was going to flashback to the 70s and try playing with price caps to control the price of gasoline. Here is how I predicted it would play out:

So Hawaii is going to put price caps on the wholesale price of gasoline, so let's play out how this is going to work:
1. Supply is going to decrease. With an artificially set maximum price suppliers are going to be less excited about selling product to Hawaii and local refineries (if there are any) will have zero incentive to boost production.
2. As any red-blooded capitalist knows when supply goes down, price goes up.
3. Hawaiian citizens will be paying higher prices for their gasoline with price controls than without them

It’s almost a full year later, let’s check back in on how our nostalgic Hawaiians are doing.

One study by an economics professor showed the gas cap cost consumers 5 cents more per gallon. An analysis by the state Department of Business, Economic Development and Tourism estimated that island motorists paid $54.9 million more than they otherwise would have in the first five months under the cap. But research by cap supporter Rep. Marcus Oshiro indicated the limits saved drivers $33 million.

Two say worse, one says better, but the public perception is that it is worse, so the legislators are eliminating the caps for now. I guess they want to wait for a time when caps will cause long lines and general unrest before they bring them back again.

It really is amazing how well the crystal ball works when hack politicians decide they can control the market. I guess it would be too much to ask for them to finally get around to taking that Econ 101 class isn’t it?

HatTip: Hit and Run
More thoughts at Cafe Hayek
More of the same from Kip: He says that any college junior econ major could have predicted the outcome, I think he is over-estimating the difficulty here - I have never taken an econ class and I managed to figure it out.