Here’s a letter to my good and wise friend Reuvain Borchardt, who wrote in response to this recent letter:
Reuvain:
You’re correct that many advocates of caps on prices that buyers can legally pay also propose caps on quantities that buyers can legally purchase. The idea behind the latter cap is to stop the former cap from causing buyers near the front of the lines from buying so much that nothing is left to buy for buyers further back in line.
But such “quantity caps” (as we might call them), while doing absolutely nothing to prompt suppliers to bring more supplies to market, do very little to prevent some buyers from hoarding excessive amounts to the detriment of other buyers.
It’s true that a store can limit the number of rolls of toilet paper and gallons of milk that each customer purchases per shopping trip. But it’s practically impossible for stores to prevent any customer from going to many different stores to build up his or her hoard. More importantly, even a “quantity cap” enforced vigorously by government would do nothing to prevent members of reasonably well-provision households who might otherwise avoid shopping for goods priced “gougingly” high from stocking-up further at artificially low prices.
Proponents of price controls deny at least three realities. One is that whenever supplies fall short of demands, some demands necessarily remain unmet; this fact is a matter of simple arithmetic. Second, the determination of whose demands are met, and whose aren’t met, is at best arbitrary and, more realistically, done according to political, business, family, and social connections. Is it realistic that the supermarket manager won’t stash some hand-sanitizer aside in case the Mayor or the manager’s niece might come in to buy some?
Third, the unintended negative consequences of government restrictions on market exchanges breed other and ever-more authoritarian government restrictions on human actions. Price caps breed purchasing caps. Purchasing caps, in turn – for reasons hinted at above – breed additional government controls on who can and who can’t buy how much and when and for what purposes.
Ludwig von Mises wrote brilliantly on this matter.*
Sincerely,
Don* See, for example, chapter 4 of Mises’s 1952 collection, Planning for Freedom.
