price manipulation

Mexico City- President López Obrador has promised not to raise the price of fuel or electricity above inflation. Last Wednesday, he put on his angry presenter of Who’s Who in Lies to confirm that it was wrong that he took “petrol.” In fact, Magna petrol grew by 13 per cent in 2021 and premium by 20.8% (reforma). All energy products grew by 11.5 per cent in 2021 against 7.36 per cent for general inflation (Inflation). But that’s not the issue. Setting the maximum amount of growth in any given product reveals a dangerous ignorance about the role of prices in the economy.

Prices are a result, an indicator of changes in a market. They act as a communication mechanism between thousands of independent producers, distributors and consumers. They make adjustments to the market possible. When prices rise, consumers reduce their purchases and producers increase their output; When they fall, consumers buy more and producers produce less. If there are no realistic and flexible prices, distortions accumulate which eventually lead to shortages and economic distress.

In a political act in 2016, López Obrador confirmed that, if Morena already ruled, gasoline would cost 10 pesos per liter. In his political commitments for 2018, he promised that the price of energy would not exceed inflation. They are promises that buy votes, but can have a cruel price for society. Venezuela has maintained unrealistic gasoline prices for years, which has contributed to destroying the Venezuelan oil industry and making the country poor.

Many politicians dream of centering all decisions on prices. However, centrally planned economies have always failed due to such attempts at price manipulation. Friedrich Hayek, the Nobel Prize-winning Austrian economist, wrote, “Knowledge of the conditions we should use never exist in a concentrated or unified form, but only as scattered pieces of incomplete and often contradictory knowledge.” which is different for all individuals.” Of economy. In the old Soviet Union, according to American Thomas Sowell: “There was a knowledge problem that was embedded in the system. Those who had power did not have knowledge, and those who had knowledge did not have power.

Pretending that price manipulation can be the foundation of an economic policy is tantamount to putting the cart before the bull. Prices tell us about market conditions; Raising or lowering them artificially prevents them from giving us this important service. “Price controls only work for politicians,” Sowell said. They allow them to raise their necks in front of voters and buy votes, but they all have dire consequences.

A healthy energy policy goal could be to remove barriers to gasoline production. Removing all barriers to investment in refineries, transportation pipelines and gas stations will help reduce costs. But rigging prices for artificially cheap gasoline, favoring automakers, will sooner or later be nothing more than an economic disaster.

Eye

AMLO showed a photo on January 7, in which Gennaro García Luna looks at Carla Bruni, the wife of the President of France in 2009, “disrespectfully”. I don’t think his gaze was outrageous, but the bottom line is that García Luna seems to have made significant mistakes: It’s not relevant to see an attractive woman in a drug trafficking case.

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