Price controls

Price Controls Were a Disaster in the 1970s. They Would Be a Disaster Today, Too.

The idea would benefit central planners and grow the ranks of bureaucrats while making the poor even poorer.

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With some pundits advocating for price controls to fight inflation, it suddenly feels like the 1970s again. This type of overbearing intervention has never worked as marketed, something President Richard Nixon discovered in 1973 when he lifted the wage and price controls he had implemented two years earlier.

Still, to those unwilling to learn from history, such controls will always seem sensible. Inflation amounts to rising prices, they say, so locking in prices is a supposed easy fix.

But treating inflation this way is like masking a symptom rather than curing the illness. Inflation can no more be controlled by fixing prices than your body weight can be controlled by programming your bathroom scale not to display pounds above some maximum number.

And just like masking your weight will not improve your diet, the misinformation conveyed by price controls will worsen the economy. Most of the time, prices are not simply set by an all-powerful seller; they're a measurement of what consumers and sellers agree a product is worth. They tell entrepreneurs and businesses how to move resources from activities consumers want less of to those consumers value more.

But again, some are unaware of this reality. Political Scientist Todd Tucker, for example, recently wrote in The Washington Post that "there are normative reasons for not wanting pure markets to exist, because necessary products could be priced out of reach for poor and middle-class consumers." He concludes, "To ensure that the wealthy do not bid up prices for essential items, the time is now to begin destigmatizing greater democratic control over price levels."

Wrong. Unusually high prices mean there isn't enough of something to go around and capping its price all but guarantees shortages. Units are quickly bought up, allocated by corruption or random chance, or moved to more lucrative underground markets. Over time, fewer goods are made because none of these methods inspire legitimate producers to invest in them. Among the many negative consequences of shortages are disproportionate harm to the poor.

This is not mere armchair theorizing. Economic literature is full of examples showing how attempts to cool inflation with price controls caused economic calamity. From the ancient Roman Republic to modern-day Venezuela, it brings the same, disastrous results.

And what about, as others are now advising, capping only the prices of goods and services sold by businesses deemed to be monopolists? Again, what sounds so simple is truly unworkable without harmful consequences for the average person.

First, identifying who these monopolies are is difficult. More importantly, when a firm does have some monopoly power in the modern economy, that power is almost always only temporary. High monopoly prices create huge profits which, in all but extreme cases, bring in new competitors who have every motivation to offer lower prices. Price controls can eliminate this incentive, further entrenching "monopolists."

Suggestions like these expose how little some pundits understand about inflation. What we're dealing with is a rise in the general price level caused by the government printing money, borrowing at high levels, sending checks to people (some of whom don't need it), and thus increasing customer demand in an environment where some shortages exist. Fixing the problem means addressing the core causes. It can't be solved by capping a few prices.

Leaving aside the poor economics driving the push for price controls, there is one thing we can be sure of: The idea would benefit central planners, empower the politically savvy, and grow the ranks of bureaucrats. Tucker acknowledged that "it is likely many more officials would need to be hired," though not necessarily as many as the staggering 160,000 price regulators employed during World War II. The promise of more public employees may please some readers, but a small army interfering in our economic affairs would make a bad idea even worse.

Inflation is painful. But tackling it with terrible policy just adds insult to injury.

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  1. The people largely responsible for inflation should not be given authority to attempt to fix it.

    1. Who knows better how to fix something then the people working so hard to break it?

    2. It will work this time!

      1. We finally have TOP MEN on the job!

  2. Any economist seriously contemplating price controls as the way to fight inflation should have their PhD stripped from them.

  3. They Would Be a Disaster Today, Too.

    Feature, not bug.

  4. Fun fact: The long gas lines of the seventies that are pictured so often did not appear until the day after the federal price controls on gasoline.

  5. Nixon used price controls because he knew a Fed increase in interest rates would be suicide going into a re-election campaign. He had Fed chairman Arthur Burns in his pocket; God only knows why.

    Nixon's pressure on the Fed, and Burns' inaction, doomed the U.S. to 10 more years in the shit. Price controls were only for 90 days, and mechanically were a pointless sideshow, but they made it clear that no one in government was serious about tackling the real problem.

    “Inflation is always and everywhere a monetary phenomenon.” -- Milton Friedman

    1. Nixon's controls went on longer than 90 days : there were "phases." Wiki article

      We should have known Tricky would pull that rabbit out of his hat.

      In other words, we are not considering wage or price controls. My own first job in Government was with the old Office of Price Administration at the beginning of World War II. And from personal experience, let me just say this: Wage and price controls are bad for business, bad for the workingman, and bad for the consumer. Rationing, black markets, regimentation-that is the wrong road for America, and I will not take the Nation down that road. .... and then he did!

      Address to the Nation on the Rising Cost of Living 17 Oct, 1969

  6. The Inflation Lie part 2000 or so.

    The Main Sleaze Media ran this lie back about 2012 to try to cover for Obamas utter incompetence and throwing money to his buddies in the TBTF banks.

    The lie was, just like now, that inflation caused price rises.

    That was 2012 when INFLATION WAS AT A HISTORIC LOW OF 0.8 % according to BLS.

    Same Democrat incompetence to crash the economy, same lie being spun.

    Expert evidence to support this not Reasons politically motivated bullshit in lockstep with the Main Stream Leftist Media:

    Forbes - NO MONEY IS BEING PRINTED.
    https://www.forbes.com/sites/beltway/2011/06/20/the-myth-that-the-fed-is-printing-money/?sh=2378d8a72810

    1. "...The lie was, just like now, that inflation caused price rises...'

      You really ought to STFU when you post about issues of which your ignorance is palpable.

  7. Buchanan on CNS - Bernanke lying about inflation to scare people into spending their way out of a Democrat Economic Disaster:

    "What the Fed should do, he says, is change expectations “by leading people to believe that we will have somewhat above-normal inflation ... which would reduce the incentive to sit on cash.”

    https://cnsnews.com/blog/patrick-j-buchanan/fed-trashes-dollar

  8. A “Planned” economy denies your ability to plan.
    Wife and I have a tradition of lunch ‘out’ on Christmas day; lunch at a tavern, big dinner at home later. We have, all of us, watched the news, seen economic trends, adjusted plans as a result and (I’m assuming most of us) had some idea what we might do for lunch next Christmas. No longer true.
    In a (largely) market based economy, you can pretty much plan on that place being open on Christmas day, as they have for the last X years. No longer true
    Courtesy of Newsom getting up on the wrong side of the bed several weeks back and a huge remaining cohort of Chicken Littles (fuck you JFree, with your PANIC flag wrapped around the chain on a running chainsaw, ditto CNNMSNBCCBSPBS, etc) about the only place open for lunch was a casino on the SF peninsula. Off we went to about the worst meal in memory (THAT’S Sweet and Sour Pork?!). Wife was considering what we might do next year; not possible.
    In an economy ‘planned’ by asshole econ-ignoramuses like Newsom, what might be open next Christmas day pretty much depends on whether he has a hangover or not on a certain day; there is no way to predict that with any degree of reliability.
    This needs to be understood in the macro also: International trade functioned very well indeed for years as the managers of the trade companies could see with a great degree of accuracy and in large amounts what was gonna go where and when (don’t waste your time pitching autarchy; another ‘planned’ economy)
    Want huge numbers of empty containers where they aren’t needed? Want traffic jams of container ships off the CA coast? Want to put up with crummy meals since restaurants closed? Want shelves empty and inflation besides?
    Easy: let even very smart people try to ‘plan’ the economy, let alone econ-ignoramuses like Fauci, Newsom and Cuomo.
    Planned economies DO NOT WORK!

    1. I am reading Truman by David McCullough. I just got through the 1940 election and the formation of the Truman committee. The first thing that jumped out at me was Truman continued to support The New Deal, as did most politicians of both parties, despite the fact that he acknowledged that after 8 years it hadn't ended the Depression and didn't appear to be working. The second thing was all the bureaucracy FDR created to deal with the military expansion in the lead up to Pearl Harbor. None of the multiple new agencies were sure what they were supposed to do. None were monitoring the contracts. The DoD was opposed to the Truman committee because they felt any investigation of how contracts were being dealt with and fulfilled would slow down the expansion. Contracts were going for triple what was contracted. Base construction contracts were being awarded and overseen by the Quartermaster Corp (which always had had a history of questionable contract awards) and often times didn't look for the lowest bidder. Rather than purchase the heavy equipment needed, the DoD (actually at the time it was the Department of War) was renting the equipment on a daily basis. No one was overseeing the construction, and on one visit to Ft Leonard Wood, Truman and his fellow senators found that equipment and supplies had been left out in the rain for an extended period of time and was no longer useful, while the construction crews were standing around doing nothing for 10 hours a day and getting paid for it. I have to give Truman some credit, he did appear to be a thorough investigator on how tax money was spent, from his first elected office up through his time in the Senate. His committee quickly got how contracts were awarded changed, how purchases and inspection of equipment was made, got base construction transferred to the Army Corp of Engineers and according to reports issued by Marshall saved the Government $250,000,000 in the first year of the committee.
      He was wrong about the New Deal, and price control for farmers but he did appear to be fairly strict about government contracts and appears to have had a history of bringing projects in under budget when he oversaw them, from the county level, to the federal level. He also was widely applauded for his road project in Jackson County, MO, which was widely lauded as one of the most ambitious and quality civil projects, and brought in at 2/3rds the cost of the initial bond.
      Wish they were a few like him left in Congress, especially on the left side of the aisle. Other than his ties to the Kansas City machine, he appeared to be fairly honest, and appears to have even bucked the machine when it came to contract awards. But then again the DNC back then (and in many cities still does) relied on machine ran politics.

      1. The New Deal helped transform a recession into a decade long depression.

        1. Well, I would say Hoover's attempts at price control and price support turned a recession into a depression, and then The New Deal extended it into a decade long depression. Europe was recovering far before the US.

          1. Interesting thing about Truman. He nearly lost his election to the Senate. The story behind that is what made him appear to be honest.

            As I recall, there was a lot of corruption all around Truman. People taking bribes and shit. Evidently, the Truman family farm got repossessed and people realized Harry was an honest man. He won the election...but a very close run thing. Can you imagine how history would have changed with a POTUS Wallace (instead of Truman)?

            1. Wallace was definitely more of a Roosevelt man than Truman. The fact is Truman was always poor, despite marrying into a rich family and was still paying off debts from his failed store that he and a fellow veteran started after the got back from France. As County Judge (sort of like a county commissioner at the time in MO) he could easily have skimmed money from contracts, his fellow judges were busted for doing exactly that.

              1. Wallace was more of a Stalin man, which is why FDR eventually got rid of him.

                1. Actually, FDR wanted him reappointed, conservative Democrats kept him from getting renominated. And because FDR needed the southern vote, he didn't protest to loudly.
                  FDR was a pretty big fan of Stalin as well. Churchill described FDR's behavior as that of a school girl on love with Stalin.
                  Truman fired Wallace from his FDR appointed position in 1946 because of Wallace's sycophantic behavior towards Stalin and the USSR.

                  1. Fair points.

                2. Truman is quoted as saying in 1941, during the lend lease bill debate and the German invasion of Russia " if the Germans are beating the Russians we should help the Russians, and if the Russians appear to be beating the Germans, we should aid the Germans. Let them kill each other off, the world would be a better place". In the 1940 Senate campaign part of his plank was against FDR getting a third term. He didn't feel any man was vital to the country's well being, and that led to tyranny. He hated Stalin and Hitler, although he stated he hated Hitler more. He despised tyrants and authoritarians and worked against them whenever he could. He despised both Nazism and Communism. He also wasn't a big fan of liberals.

                  1. He did support FDR after he was nominated, but he wasn't a big fan of FDR's cabinet and especially all the Ivy League lawyers and technocrats.

            2. Yeah, Milligan, the DA that busted the Pendergast machine in KC, which Truman was associated with, split the vote against Truman's opponent. Truman also outperformed in St Louis county. Truman had almost no money for the primary race, no one was really backing him because of the Pendergast affair. He even felt he was going to lose. But he still managed to campaign and missed very few hearings or votes in the Senate well he ran. He drove his own car around Missouri, had almost no staff and at times couldn't even afford a hotel so he would sleep in his car on the side of the road. Reading his schedule I don't know how he kept it up. In DC Monday through Friday, often the first Senator to the Capital in the morning and the last to leave. He spent hours inside the Senate library studying any material on subjects before any committee he was on. During his first term the Capital building actually issued him a key, because he often beat the custodial staff to the building, and it was the only time they had issued a Senator their own key. Before his first committee meeting as a Freshman Senator, he checked out and read 50 books on railroads, so he could understand the industry better and see what the Senate had done before.

          2. "Well, I would say Hoover's attempts at price control and price support turned a recession into a depression, and then The New Deal extended it into a decade long depression. Europe was recovering far before the US."

            Hoover didn't help. but what did you find to suggest that 'Europe' was recovering? Hadn't found that.

            1. Not under Hoover, but Europe's recovery was quicker than the US is what I meant.

            2. Of course Keynesians always say both Europe's and the US's recoveries were due to the high spending of the second World War, but I've always felt that taking that many working age males out of the equation to fight a war probably had a lot to do with it.

              1. We have such a rich history (US). A pity it is not fully taught.

      2. "I am reading Truman by David McCullough..."
        McCullough is, like Manchester, honest regardless of his bias; worth reading.

        1. I like his writing. I have read almost all his books or listened to audio versions while I was driving for work. I also leave read all of Stephen Ambrose's works. I was never a big fan of Lewis and Clark (growing up in Idaho you couldn't not hear about them), but Undaunted Courage was a great book.

          1. The first McCullough book I ever read was 1776, I think I've read it 3 or 4 times.

    2. Great post!

  9. You don't have to look all the way back to the '70's when we have Venezuela right now.

    1. When socialists say “we don’t want to do Venezuela!”, they don’t mean it.

      Their policies have a lot more in common with Venezuela than libertarian policies have with Somalia. They need to own it.

      1. They do mean it! They want to be in control, not Chavez! Totally different!

      2. Yeah, I have a few (liberal) friends who think that libertarianism is just anarchy and point to Somalia.

        Meanwhile supporting literal left-anarchists in antifa (which is just an idea, sometimes, and other times, is something you can't disagree with because of the name).

        How did CHAZ work out again?

        1. "Yeah, I have a few (liberal) friends"

          Im sorry for you!

          A pet rattlesnakes would be an improvment.

  10. This Poly Sci prof is an idiot. Seriously has he taken or at least recalled eco 101? The worst sort of "central" planners are historians and poly scientists. Neither has a basic grasp on economics or human action (yes, I'm pumping the only sensible macroeconomic school).

  11. It is way past time to raise rates. Bad companies are spending money they are just going to rip through then declare bankruptcy.
    Not to mention stupid housing prices.

    Now we could wait and see how bad this goes over in the UK and other European countries but really, how much are their democracies as great as ours.

    1. Our Republic, we are not a democracy, is great because we dumped Euro democratic socialism.

      Not being Europe made us great.

      We said, like the French:

      " Down with the King AND DOWN WITH THE POPE."

  12. Nixon\Carter were still better than Biden.

    1. Jack the Ripper was.

      Fuck Joe Biden.

      1. I agree, Jack the Ripper put his victims out of their misery, Biden tortures his victims forever.

  13. To frame Fred Sanford:

    "Its Vitamin D. you big dummy."

    Sad. Anthony Faucis too educated to get it.

    Or too well PAID.

    "“We found it remarkable, and striking, to see the difference in the chances of becoming a severe patient when you are lacking in vitamin D compared to when you’re not,” said Dr. Amiel Dror, a Galilee Medical Center physician and Bar Ilan researcher who was part of the team behind the study."

    https://www.timesofisrael.com/israeli-study-offers-strongest-proof-yet-of-vitamin-ds-power-to-fight-covid/

    EAT RIGHT. BE HEALTHY.
    Drink MILK.
    Stay away from Democrats. They spread mental illness.

  14. "Lacking vitamin D significantly increases danger levels, they concluded in newly peer-reviewed research published Thursday in the journal PLOS One.

    The study is based on research conducted during Israel’s first two waves of the virus, before vaccines were widely available, and doctors emphasized that vitamin supplements were not a substitute for vaccines, but rather a way to keep immunity levels from falling.

    Vitamin D deficiency is endemic across the Middle East, including in Israel, where nearly four in five people are low on the vitamin, according to one study"

    ibid.

    Why didnt Biden tell us this?

    The bastards been too busy stuffing drug company money in his pockets.

    1. Vitamin D defunct is endemic in countries with desert climates?

      Interesting.

    2. Vitamin D deficiency is endemic across the world, according to most studies. But there is deficiency and deficiency, one might say - minor deficiencies with no major effects are common; major deficiencies less so.

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