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Quotation of the Day…

… is from page 268 of Armen Alchian’s profound 1976 essay “Problems of Rising Prices,” as it is reprinted in Vol. 1 of The Collected Works of Armen A. Alchian (2006) (original emphasis):

The so-called shortage of gasoline and energy in the United States [during the 1970s] was precisely and only such a political attack.  It could not have been brought about more cleverly and deceitfully even if the politically ambitious had explicitly written the script.  Inflate the money stock; when prices rise, impose price controls to correct the situation.  These controls lead to shortages which “require” government intervention to assure appropriate use of the limited supply and to allocate it and even to control and nationalize the production of energy.  The powers of political authorities are increased; the open society is suppressed.

Last night in Chicago I dined with Johan Norberg.  (By the way, if you’ve not yet read Johan’s book In Defense of Global Capitalism, do so.  It’s a masterpiece.)

Johan and I were discussing our introductions to classical liberalism.  My own introduction came in January 1977 when I first saw supply-and-demand analysis in a Principles of Microeconomics course at my alma mater, Nicholls State University.  My professor – Michelle Francois – explained the consequences of government-imposed price ceilings.  Shortages.  Queuing.  Arbitrary and grossly unfair rationing.  Higher costs to consumers of acquiring the goods and services whose money prices are capped by government diktat.  Increased demands for further government intervention.

The Nixonian price controls of the 1970s were not good for much, but they did reveal to those of us who suffered through them the truths of economics much more vividly than those truths might otherwise have been revealed.