What exactly is a price signal? When asked how he would, “convince people to change their life style” during an interview on Iowa public television in 2007 Barack Obama voiced the opinion that, “it is important for us to send some price signals to change behavior.” Senator Obama further explained, “the power plants are going to have to adjust how they generate power they will pass on those costs to the consumers.” This causes the term price signals to mean an economic prerogative that convinces consumers to spend their money as the government sees fit.
On the issue of these price signals making energy, particularly electricity, too expensive for lower class working people to afford senator Obama made it clear that “we will have to guard against the low income and fixed income individuals having to pay more for electricity. ” The upper class would, as senator Obama noted in his inter view also be able to afford the high price of energy, so with high energy costs easily in reach of the rich and made affordable to the lower class the weight of the new “price signals” falls directly on the lower class.
In a normal capitalistic economic environment the increased cost of energy, created in this case by government regulation, would lead to a decreased demand as may people would be unable to afford energy at its new inflated price. The decrease demand would then force energy prices to fall in order to make the product available to more consumers increasing overall revenue. However, with the government backing the price of energy for some number of citizens there would be fewer people who were unable to afford the new cost of energy the price of energy would be less likely to fall to a price that was more affordable to the middle class. Because of the government subsidy of electricity for the lower class that Barrack Obama proposes and the higher prices crated by government regulation of power plants, the government would effectively be able to set the price of electricity in the United States economy.
This cap on the price of energy would effectively destroy the capitalistic market for electric energy in the United States. The Foundation of a capitalist market is innovation and ability to provide goods that the consumer wants at the lowest possible price. Senator Obama’s intention of reducing the carbon footprint of the United States by imposing regulations on the production of electricity is well founded, but the way in which his policies manipulate the market are sure to have economic repercussions that will impede the growth and development of the United Sates energy market.
Works Cited
"Obama Wants 'Price Signals' to 'Change Behavior'" 2 Nov. 2008. Little Green Footballs. 3 Nov. 2008 http://littlegreenfootballs.com/article/31781_obama_wants_price_signals_to_change_behavior
1 comment:
A few of the points made by this video aren't accurate. Sending price signals to influence consumer behavior, effectively stabilizing a concern, here its CO2 emissions, is exactly the role of government, but it the affect of a governmental decision, not the purpose for the decision. By the same token, price signals set by Fannie and Freddie caused many under-qualified families to purchase unaffordable housing, hence changing their socioeconomic behavior, and in this case it had nothing to do with legislation. Obama's statements on emissions say that his government should enact policies to limit the rate of production, hence the emissions number, by polluting companies. One must adopt the viewpoint that the earth's health is a greater concern than consumers, production, even the economy, to understand Obama's argument. Therefore by limiting production by those companies, the goal of this legislation, companies might charge more for their services, a point which Obama brings up and has a solution for. This in no way means that the government will accept money from companies, but does mean that because of this proposed legislation on emissions, companies might force consumers to pay more. He then says that because low income households may not be able to afford this sequence of pertinent events, he is prepared to help them, since government cannot dictate how much companies change for their services in a free market. Middle and upper classes would likely feels the pinch, but wouldn't make the difference between a meal and the energy bill. Most of the information in this video lacks logical and linear thought with regard to the governmental and market systems, and their relationship. The argument seems irrational and sophomoric.
Price signals mean that when cost goes up for accepted norms, drilled into normality by years of excess, Americans must be willing able to give up many of their abused luxuries, without attacking and blaming government.
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