… from page 8 of my colleagues Chris and Rachel Coyne’s essay “The Economics of Price Controls,” which is chapter 2 of Flaws & Ceilings , a superb new collection edited by Chris and Rachel:
Prices are a commonly misunderstood concept. Many view prices as random numbers assigned by a seller. Related to this, many see prices as being an impediment to accomplishing their desired goals. For example, a young adult may desire to live in central London but quickly realises that they cannot to do so given the relatively high price of renting a flat in that area. The view of prices as impediments to achieving one’s goals is one reason why there are so often calls for politicians and regulators to place controls on prices. The belief, from the perspective of proponents of price controls, is that, if regulators impose controls, then people will be able to achieve goals that would otherwise be unachievable. For example, in order to assist younger citizens with their cost of living, a politician may propose some combination of rent controls and a living wage to make cities such as London more affordable. These views, however, misconstrue the fundamental nature and role that prices play in an economic system.