University of Illinois Law Professor Andrew P. Morriss has a new and insightful paper on regulation and gasoline markets. Titled “Gasoline, Markets, and Regulators,” the paper looks at the century-old and market-distorting “layers of regulation.” Morriss points out:
Unfortunately gasoline markets are buried in layers of regulation that obstruct the normal market processes that generate these signals to balance supply and demand. Because the aims of these regulations are often mutually contradictory, the impact of the thicket of regulation is even worse than first appears, distorting decisions on everything from the search for oil to investments in refineries. The legacy of more than a century of federal and state interference in market processes is that gasoline markets are vulnerable to price spikes and shortages. However, rather than prompting a public outcry to clear the thicket, these conditions inevitably trigger demands for yet more regulations to correct the distortions introduced by the earlier interventions. The current demands by politicians for windfall profits taxes, reductions in oil imports, increases in use of ethanol, and fuel economy mandates reflect their failure to fully understand the legacy of failed regulation that shaped today’s energy markets.
I skimmed the paper quickly and read his recommendations. I don’t think I agree with one of them, but may be confused. Others’ thoughts on this?