In his defense of the oil companies {op-ed, Sept. 3} Alan S. Blinder fails to address some intriguing questions concerning recent oil pricing: (1) Where was the operation of "market capitalism" in the first half of 1990, when oil prices by the barrel were falling but the price at the pump changed little, or even rose? (2) Why did the oil companies raise the price of gasoline in anticipation of production shortages, instead of also anticipating a concomitant rise in production by other nations, as is now beginning to occur? and (3) How can anyone talk about "market capitalism" in the face of internationally managed production (OPEC) in the first place, or is the professor's avoidance of the term free-market deliberate? I suggest that if Professor Blinder were to leave the academic isolation of his Ivy League campus he would find that in the real world "market capitalism" is, and for some time has been, nothing but a myth. EARL HODIN Annandale

Thank you, Alan S. Blinder for a lucid lesson in expounding the ABCs of market capitalism and your robust defense of oil companies and their right to make profits.

Like most companies, regardless of size, oil companies do fall on hard times and must sell their products below cost. The situation is somewhat analogous to the workings of the stock market. Shareholders are always subject to some degree of risk when they buy a share in American industry. They may lose, but they can also profit when the goods and services of a company are in strong demand.

In full recognition of the benefits and risks of our free enterprise system, most Americans do not want governmental intervention unless it is clearly in the interest of national defense. RUTH G. ADLER Washington