Jerry Taylor & Peter Van Doren criticize the NOPEC bill that just passed the House:
the House of Representatives passed a bill on a vote of 345-72 that would allow the federal government to sue OPEC for violations of America’s anti-trust laws … First, the obvious question arises – exactly how would the United States government enforce such a law? … Second, what exactly gives the Congress the right to impose its economic regulations on state-owned companies that, for the most part, aren’t doing business in the United States?
Not being an attorney, I’ll grant these two critiques but when Taylor and Doren turn to economics, this gets stupid:
Now, one might argue that the state can prohibit price fixing and collusion without prohibiting companies from having the final say over their own production schedules absent coordination between firms.
The essence of exploiting monopoly power is to reduce production so as to drive up the market price. When there are more than one firm supplying a good, the reason cartels are formed is that they coordinate their production to approximate the monopoly solution. Only someone writing for the National Review could get an argument this wrong.
Update: Reuters reports on the NOPEC bill as well as a second piece of legislation passed by the House – and the incredible lack of understanding of basic economics by our politicians just gets worse:
The Democrat-led House approved legislation Wednesday that would give the Federal Trade Commission more authority to probe price profiteering from gasoline and other refined products … It was the second energy-related bill the House passed in as many days, after it voted Tuesday to give the FTC the authority to sue members of the OPEC producers group for price manipulation. The Bush administration has threatened to veto both bills, warning that they could pinch supplies.
On the second piece of legislation, the President may be right assuming the U.S. refinery and distribution markets are competitive. OK, I did have an earlier query on this issue but I don’t see the House Democrats making the case that price controls won’t create a shortage. But if the first bill is supposed to go after a monopolistic cartel, then standard economic theory suggests the increase in production from ending the cartel behavior will lower prices. So I can’t give President Bush a passing grade on this one either.