Bernard Weinstein writes that high gas prices are not about price gouging (Dallas Morning News, June 1, 2007). They’re nothing but the result of the law of supply and demand working. Trouble is it takes him 728 words to say it, and it’s purebred bull.

Economists educated in American universities are under the delusion that economics is a science, a social science. When I was studying philosophy and mathematics, all the students I knew called it pseudo-science, and it still is. Ask ten economists to make a prediction about an economic event based on their scientific knowledge, and you won’t get unanimity. I learned that decades ago watching Wall Street Week with Louis Rukeyser and soon gave it up as a waste of time. Contrast that with what ten chemists will tell you will happen if you combine certain chemical elements. So economics a science? Not by a long shot. Yet American economists never seem to learn this lesson. And that is very suspicious.

But consider supply and demand. That so-called law is based on a primitive agricultural model built before the time that agricultural products could be easily preserved. If growers had a bumper crop of apples, selling them all might require lowering an apple’s price; most of the apples not sold would rot and have to be discarded. But what does demand mean in this situation? The number of buyers willing to pay the going price of apples. Presumably, if the price were lowered, more buyers would be willing to buy. But there is nothing necessary about it. In a small community, for instance, everyone could very easily have had his overfull of apples, in which case the sellers would not even be able to give them away. So much for the law of supply and demand.

Consider another example. Suppose a seller of electronic products knows that a new model of a radio he has in stock is about to be delivered in two weeks, but he still has a few of the last model still available. He knows that the new radio is only cosmetically different from the old. After all, it has been a long time since basic radio circuit technology has been improved upon. So he says, if I lower the price, I may be able to get rid of them before the new models arrive. But I really don’t have to; radios don’t spoil. So instead of lowering the price, he decides to raise it ten percent and put a “for sale, ten percent off” on the radios. And even if he still has some of these available when the new model arrives, he merely raises the price on the new model so that it is ten percent higher than the raised price of the older model. Since he knows that a lot of buyers buy by looks, he knows that some buyers will buy the newer model even if its price is higher, and that others will decide to buy the older model because of its “lower” price. Under this scenario, the seller increases his profits on both models. Law of supply and demand be damned!

And what can we say about the price of satellite tv? The supply of transitions to homes is virtually infinite; yet the demand is decidedly limited. If the law of supply and demand were really a law, satellite tv would be virtually free. But damned, it isn’t.

Poor Mr. Weinstein! Either he knows he’s full of purebred bull and is deliberately spreading propaganda or he’s incredibly stupid. Take your pick; I don’t think he’s stupid.

Gasoline prices are a function of many factors, the price of crude being only one of them. Other factors are the costs of refining crude into gasoline, and oh that ubiquitous thing called profits. Oil companies can manipulate all three, but especially the latter two. Shut down a refinery for maintenance when the demand is high, and they’ve reduced supply and have an excuse to raise prices citing “supply and demand.” Shut almost all of them down at the same time, which for some reason, the oil companies do, and we have a crisis. Oh, what a wonderful excuse to call upon the law of supply and demand.

John H. Seesel, associate general counsel for energy at the FTC, may not be able to define "price gouging" but there are two definitions implicit in the previous paragraph. If Mr. Weinstein can find them, he can send them to Mr. Seesel.