Markets Anticipate the Future


Kurt Bouwhuis, Mackinac Center Intern
Here is a great post from Cafe Hayek Today. Enjoy!

“Here’s a letter that I sent today to WAMU, a local DC radio station:

Dear Sir or Madam:

This morning your reporter interviewed a resident of Galveston, Texas, about the effects of hurricane Ike. The person interviewed said that she went to the gasoline station before Ike hit to “top off” her tank. But she was angry to find that gasoline prices had jumped 50 cents per gallon from the day before. “It’s ridiculous,” this woman opined. “Ike hadn’t hit yet!”

Your reporter should have immediately asked this woman: “Well, why were you topping off your tank? Ike hadn’t hit yet.”

Gasoline became more scarce — more precious — in Galveston the moment Ike’s arrival became likely. Gasoline retailers acted in anticipation of the future no more or no less than did motorists (such as your interviewee) who topped off their tanks.

Sincerely,
Donald J. Boudreaux”

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