The oddity of economic othodoxy being what absolutely no one is doing

The IMF gives us the entirely standard economic orthodoxy here:

Ministers should allow heating bills to soar to encourage energy conservation and accelerate the push to net-zero carbon emissions, the International Monetary Fund (IMF) has claimed.

The global lender of last resort urged governments not to subsidise household energy costs, as it insisted that usage must come down amid fears that Vladimir Putin will cut off gas supplies this winter.

It said that artificially reducing energy bills would only make the looming crisis worse by increasing the risk of shortages, as well as encouraging reliance on fossil fuels.

Oya Celasun, the IMF’s Europe assistant director, said: “Governments should let retail prices rise to promote energy conservation while protecting poorer households."

European countries have rushed to prop up households facing a huge shock to incomes from the surge in energy bills.

However, cushioning the blow to family budgets means many are less likely to cut back on energy usage. That would stop demand falling back in line with supply, keeping prices higher for longer and helping to fund Mr Putin’s war machine.

Ms Celasun added: “They should allow the full increase in fuel costs to pass to end-users to encourage energy saving and switching out of fossil fuels.

“Policy should shift from broad-based support such as price controls to targeted relief such as transfers to lower-income households who suffer the most from higher energy bills.”

She said that mitigating the hit to households “keeps global energy demand and prices higher than they would otherwise be”.

Subsidising demand in a time of dearth is stupid. Taxing supply in a time of dearth is equally ludicrous. But of course the political demands are all let’s tax the suppliers and then push down energy prices. But, dummkopf, we’re in a time of dearth, which is exactly when we do not wish to be reducing supply and increasing demand.

We not just desire but positively lust after people being exposed to the changes in prices. Because those prices are the very things which change behaviour which will aid in dealing with the dearth.

Now of course this does then lead to an outbreak of Bob Cratchits and really, we could all do without an epidemic of Tiny Tim mawkishness at this time of year. So, the answer is to subsidise - if any subsidy is necessary - incomes. People exposed to the higher prices will still economise upon energy consumption, the thing we need, but it is possible to limit the knock on effects on other forms of consumption like food and branded sneakers.

Or, as we’ve been known to point out, never, ever, subsidise things, subsidise people instead.

That this isn’t what government (s) is (are) doing is just further proof that allowing governments anywhere near economic policy is a mistake. But then we knew that.