Quotation of the Day…

by Don Boudreaux on August 19, 2015

in Prices, Reality Is Not Optional, Seen and Unseen

… is from page 120 of Introducing Market Forces Into “Public” Services, which is volume 4 in the 2004 Liberty Fund series The Collected Works of Arthur Seldon (original emphasis):

A price is better thought of not as a barrier but as its opposite – a link between buyer and seller.

Government force (or the threat of such) used to cause prices as revealed in money to be something other than prices would be on the market breaks vital links between buyers and sellers.  Some buyers who would otherwise buy, and some sellers who would otherwise sell, are left disconnected to each other because of the government-imposed price control.  As a result, uncountable numbers of mutually advantageous voluntary exchanges that would have occurred do not occur.  This reality holds for government-imposed price floors (such a minimum wage) and government-imposed price ceilings (such as rent control).  In both instances, the amounts of the price-controled good or service that actually find their way from willing sellers to willing buyers are less than are the amounts of these good or services that would have found their way from willing sellers to willing buyers in the absence of the price controls.

People who believe that a government-imposed price floor makes all sellers better off, and people who believe that a government-imposed price ceiling makes all buyers better off, are no more realistic than are people who believe, say, that a meddlesome mechanic who rigs the thermometer on a thermostat to cause that thermometer never to register a room temperature higher than 65°F successfully ensures that the temperature in that room will in fact never, regardless of how much heat is being pumped into that room, exceed 65°F.

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