Politicians flunked Econ. 101
MK Miri Regev (Likud ) is mad at TheMarker after we wrote that her support for cutting the state's revenues from natural gas production is serving the interest of the rich - not the public. She said she had supported the weak throughout her term, and that taxing the gas explorers more would only lead them to pass on the costs to the citizens, for example by higher electric rates; but it is clear Regev has never studied economics.
National Infrastructure Minister Uzi Landau also knows no economics.
The problem is most of those read their comments in the news don't know any economics either. Regev would have failed any introductory course in the subject, and I don't know whether to laugh or cry.
The taxes would not lead to higher electricity prices. The new taxes are only on profits from gas production: the cost of production would not increase. The second, more fundamental problem is that in this case there is no connection between the cost of production and the price of the product. As any student knows, price is based on supply and demand - not the cost of production. In this case, neither supply nor demand would change by taxing the profits - as long as there is competition. The only way that could happen is if there is a monopoly and a lack of competition in the sector. To truly help the public, the politicians must act to prevent a monopoly, such as by building a liquefied natural gas facility.
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