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Price Controls

I owe a great deal to Uncle Sam’s energy-price controls of the 1970s.  Seriously.  Were it not for these market obstructions, I’d likely today be, like my father was, a welder or a pipe-fitter.  (Not that anything is wrong with such an occupation, but the pay and amenities of my scholarly life are much superior to those of a welder or a pipe-fitter.)  Having personally sat in many long lines to buy price-controlled gasoline during the disco decade – and on more than one occasion discovering before I inched my way to the front of the line that the pumps had run dry – I was primed by this unhappy reality to appreciate supply-and-demand analysis when I first encountered it as an 18-year-old.

Residents of Mumbai should be equally well-primed to learn and grasp basic economics.  My colleague Alex Tabarrok here reports on the dreadful yet all-too-predictable results of rent control in that city.

And yet, as even some comments on Alex’s post reveal, some people continue to believe the pretenses of price controllers.  Some people continue to believe the myth that the state makes goods and services less valuable by holding prices down by diktat, and that the state makes other goods and services more valuable by pushing prices and wages up by diktat.  Such beliefs about price ceilings and price floors are no more credible than is a belief that the universe was created 4,000 years ago or that the earth sits stationary atop a tower of turtles.  Such beliefs about price ceilings and price floors are, though – and as Alex’s post makes plain – far more dangerous than are any of the countless wacky beliefs that people have about the nature of the cosmos.

To be more blunt: proposals to impose price ceilings as a means of helping consumers, or to impose minimum wages as a means of helping low-skilled workers, deserve to be regarded with as much hilarity and scorn as are proposals to flap one’s arms as a means of flying like a bird.  Sadly, they are not so regarded.