This is John Batchel, a conversation with John Cochran, senior fellow for the Hoover Institution,

about shortages, price shocks, inflation. Is all that headed our way as it happened in 1979

and during the beginning of the Islamic Revolution that we're now witnessing fall apart

under the attack by the U.S. and Israel, is it inevitable?

Is it already there?

And what causes this price shock?

What causes the shortages?

What causes the inflation?

I think John says the politicians.

But here, listen to him.

It's a formula, and it happened in 79.

He hopes that it's not coming our way again.

More of this tonight.

Well, I hope not, and I hope it's not headed to us,

because that is the bad way to handle an oil price shock.

When there's less supply to go around, the prices need to go up.

Why? To give people an incentive that if you don't really need to use it, can you hang on a while

or do something else or substitute something else? And to give businesses an incentive to expand

production in the oil wells that aren't necessarily profitable at a low price.

And, you know, so the first rule of economics is don't transfer income by scrolling with prices.

And the first rule of politics is exactly the opposite.

So the instinct of people in charge, you know, they're worried about irascible voters and affordability and so forth.

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