Posted by: wtfwjd? | May 29, 2008

Friedmonomics

I’m no economist, but something about Friedman’s latest mustache dripping sounds dumb to me:

Washington would declare that it would never let the price fall below that [$4 a gallon] level. If it does, it would increase the federal gasoline tax on a monthly basis to make up the difference between the pump price and the market price.

He then goes on to talk about what we could do with the proceeds from the gas tax. But isn’t this kind of idiotic? I mean I am all for higher gas taxes, and higher disincentives towards automobile use and gasoline consumption, but if Friedman’s plan were enacted, what incentive would there possibly be for retailers to set the “price” of gas at anything below a profit-maximizing $4 a gallon? Answer: none. So the retail price of gasoline, exclusive of taxes, would never drop below $4 a gallon, and if wholesale prices fell, the savings would go into the pockets of oil companies and gas station owners. The gross receipts on the gasoline tax would be exactly 0.

Am I missing something here?

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