Quotation of the Day…

by Don Boudreaux on November 4, 2012

in Prices, Reality Is Not Optional

… is from page 519 of Volume I of The Collected Works of Armen A. Alchian (2006); specifically, it’s from an op-ed that Alchian published in the Los Angeles Times sometime in 1979 and entitled “It’s Easy to End Gas Shortage”:

An obstinate belief of some people that the value of having gasoline can be kept low by limiting the price to be as low as when there was more gasoline is just plain wrong.  The quicker that obstinate error is understood by politicians and the public, the better.  Yet [President Jimmy] Carter and his politicians refuse to either understand or admit they understand that pervasive, inescapable, overwhelming fact of life.  As a result we are suffering the consequences of these price controls.  We are not allowed in a civilized fashion to offer money to sellers of gasoline.  Instead we now compete like barbarians in wasteful forms – standing in lines, inconvenient service hours – a gigantic social waste in a futile, ignorant, deceptive effort to keep values and costs low.

Alchian’s use of the phrase “fact of life” reminds me that many on the “Progressive” left pride themselves on their unapologetic embrace of science and rational thought and on their rejection of superstitions.  And yet many of these same people support the likes of rent-control and minimum-wage legislation.  (I’m also quite sure that a far greater number of self-identified “Progressives” than self-identified libertarians – and, although I’m less sure about this one, even than self-identified conservatives – support legislation to prohibit so-called “price gouging” when natural disasters strike.)

While theories can indeed by scribbled on a blackboard to show how price controls under just the right circumstances generate greater social utility – or generate greater equity (as defined by the blackboard scribbler if not by a significant number of the actual individuals who would be affected by the implementation of the scribbler’s theories) - proponents of actually using such blackboard theories always suffer the delusionary superstition that the blackboard scribbler can enchant government agents into behaving as drones who follow without fail or flaw every instruction given to them by the blackboard scribbler.  Because of this reality, even the best cases for price controls are, in practice, unscientific.  They are idle abstractions mistaken for practical reality.

But even such “best case” opportunities for “good” price controls are rare.  In nearly all real-world circumstance, government-issued prohibitions on adjustments along one important dimension of exchange and contract (namely, along the money-price dimension) will even in theory make matters on the whole worse than matters would be without such interference.

For government to control prices is akin to government killing the messenger who brings unwelcome news.  And many “Progressives” fancy that the bad news that would be reported by the honest messenger is miraculously transformed into better news simply by garroting the messenger and burning his correspondence.

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