We may not like how prices work. We may greatly prefer that the outcome was something different. But it is true that prices work.
This is the point that is at the heart of free market economics. Let us have the prices -- the things that work -- and thus the economy that works.
The parts we do not like about the results, we can clean up if that's what we want to do.
For example, the free market might lead to some people having more money than others. Well, OK. Maybe we're OK with that, maybe we're not.
If we're not, we can tax the richer people and give the money to the poorer. Not that I would recommend that but it is, obviously, possible.
But this is something done after the free markets and prices have been allowed to work. This is, largely enough, how that social democracy of the Nordic countries works.
They are more free market, even more capitalist, than most of Europe and even the US. But then they have higher taxes and more redistribution.
As I say, that's not what I would do, the redistribution, but it does work. You have rich places still getting richer under such a system. Because the market is allowed to work first, to create the wealth that can then be redistributed.
As opposed to a system where the bureaucracy decides that prices cannot be allowed to work, and therefore the economy doesn't create the wealth that can then be collected.
This is the starting point for talking about the gas shortage in Bangladesh. As this newspaper reports, there is an energy crisis in industry. The energy deficit is becoming a macroeconomic problem. Factories have to close simply because there is not the natural gas to keep them running.
As is so often true, the problem now is that we were not doing things the right way in the past. This does not help us a great deal right now, but it does inform what we should be doing now in order to have fewer problems in the future.
We should allow energy prices to be free market. As I said back in March this year in fact. I agree, this does not help us very much right now. But getting the right underlying policies now means fewer of those problems in the future.
So, what this means is no allocation of energy by the government. No pricing of energy by the government. And the true meaning of “free market” is that it is free of bureaucracy, of permissions, to enter the market.
So, if someone wants to drill for gas in the Bay of Bengal, they can. Or on land. Or build another, or more, LNG terminals. Or, of course, build out solar panels, or windmills, or any other energy provision service they desire to throw their money at.
Leave the market be that is. Allow prices to do their work.
The argument against this is that at times, poor people -- or some factories -- will not be able to afford the energy. Yet, for poor people the solution is simple -- give poor people some more money so as to be able to afford the energy.
For factories that have to close, what's different from what is happening now? Factories are closing because there is no energy, not just because energy is expensive.
The very beating heart of this argument is that markets -- and the freer the better -- work very well. Except for that one little thing, sometimes we do not like the results of reality working as it does through markets.
The correct solution to this is to still use the markets but then adjust the results. Instead of what happens all-too-often, which is to insist that as markets produce undesirable outcomes, therefore we must use planning and bureaucracy instead.
Which is what leads to what we have now -- bad results but no way of solving them. For we do still have factories closing because there is no energy to run them.
It is entirely true that markets are not perfect and that we'd sometimes like the results to be different. That's fine, as long as we run with this rule -- markets first, adjust the result later.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
