≡ Menu

Unlike Political Diktats, Prices Are Not Arbitrary

I take a stab again, here in the Wall Street Journal, to explain the beneficial role of prices – and the harmful consequences of government-imposed price controls.  Here’s my opening:

As Hurricane Maria barreled toward Puerto Rico, Sen. Bill Nelson worried that ticket prices for flights out of San Juan and other Caribbean cities would surge. The higher costs would prevent some people from fleeing the storm, the Florida Democrat figured. Using his influence as head of the Senate committee that oversees airlines, he urged major U.S. airlines to cap fares for flights leaving cities in Maria’s path.

Airlines quickly complied. Mr. Nelson’s office declared victory. Economists wept.

That’s because high prices are an essential way to ensure that resources get where they are desperately needed. Imposing artificially low prices creates shortages of vital supplies and makes it harder for people to recover from disasters.