Here’s a letter to the Wall Street Journal:
Editor:
Jason Zweig suggests that price controls might be worth a try “when there’s a national will to see them succeed” (“An Old Way to Fight Inflation Gets New Fans,” June 3). The chief piece of serious economic research he cites in support of his case is Hugh Rockoff’s 1981 paper, “Price and Wage Controls in Four Wartime Periods,”* that does indeed report limited and qualified evidence that wartime price controls sometimes might break expectations of inflation without seriously reducing economic productivity.
But beware of the allure of price controls. First, economic historian Robert Higgs has demonstrated the unreliability of the wartime output measures used by Rockoff as a basis for concluding that wartime price controls had little negative impact on economic productivity.**
Second, Rockoff himself concludes a 2008 essay on price controls with this warning:
By examining cases in which controls have prevented the price mechanism from working, we gain a better appreciation of its usual elegance and efficiency. This does not mean that there are no circumstances in which temporary controls may be effective. But a fair reading of economic history shows just how rare those circumstances are.***
The indispensable role that prices play in allocating economic resources combines with the indisputable role that politics play in allocating government restrictions to counsel us never again to allow government to control prices.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Hugh Rockoff, “Price and Wage Controls in Four Wartime Periods,” Journal of Economic History, June 1981.
** Robert Higgs, Depression, War, and Cold War (New York: Oxford University Press, 2006), especially pages xi-xii and 61-100.
*** Hugh Rockoff, “Price Controls,” Concise Encyclopedia of Economics, David R. Henderson, ed. (Indianapolis: Liberty Fund, 2008), page 412.
