Abstract

In December 1979, the Carter administration and the Congress were embroiled in debate about the administration's new energy policy. To reduce U.S. imports of foreign oil, President Carter was invoking his statutory authority to remove gradually existing price control regulations on U.S. crude oil. To lessen the perceived equity problems of decontrol, the administration submitted to Congress legislation that politically tied the gradual elimination of price controls to the levying of a tax. Within this political environment, the American Enterprise Institute released a pamphlet by Kenneth Arrow and Joseph Kalt (December 1979) entitled Petroleum Price Regulation: Should We Decontrol? (p. 47). Given the political issues at that time, the authors mysteriously addressed only the economic wisdom of either reversing the presidential intention of decontrolling the industry or pursuing immediate decontrol. Comparing the cases for immediate instead of gradual decontrol was not explicitly undertaken. Most ironic was the authors' complete silence on what their economic analysis implied for the wisdom of levying the then-contemplated and nowimplemented windfall profits tax.

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