Here’s a letter to Time:
Editor:
Jennifer Epstein writes that “price controls have a checkered history in the U.S.” (“Kamala Harris to Call For ‘Price Gouging’ Ban on Food and Groceries,” August 15). Not so. Far from being “checkered,” the historical record of price control is one of unremitting calamities. Many of us still remember the nationwide shortages of gasoline in the 1970s when government capped fuel prices. The long lines of cars with anxiety-stricken drivers waiting to buy gas, and roadsides dotted with stranded automobiles with empty fuel tanks, ended when Ronald Reagan lifted these controls early in his administration.
The experience with price controls during WWII was even worse because these controls were more extensive. Here’s economic historian Robert Higgs:
Sellers and buyers used a variety of subterfuges to make transactions in violation of the government’s price controls. Sellers might reduce the product’s quality, as many did at the time; require the buyer to wait longer for an order to be filled; require the buyer to purchase unwanted goods in order to purchase wanted ones; require the buyer to pay for bogus goods, as when tenants were required to pay the landlord a hefty sum as “key money,” ostensibly to compensate him for keeping a spare key in case the tenant lost his key; require the buyer to forgo services normally associated with the goods, such as routine maintenance of rented apartments; or require gifts or other ostensible gratuities not ordinarily given to a seller. Sellers might also simply disregard the posted prices and refuse to sell to anyone except at higher (unlisted and unreported) prices. The methods of evasion were legion.
Milton Friedman and Anna Schwartz and other economists who have made corrections for the understatement of the price level during the war years have shown that even partial corrections are sufficient to establish that the government’s price controls were far from the success claimed at the time.
Consult history. You’ll find, without exception, that when government uses price controls to push prices downward the results include shortages, queues, waste, deterioration of product quality, and corruption. You’ll also often find literal violence erupting as desperate buyers struggle against each other to grab the relatively few units of the price-controlled goods that are available.
To describe the experience with price controls as “checkered” is no more accurate than to describe the experience with, say, racism or eugenics as “checkered.” Each is unambiguously and always terrible. Yet unlike with racism and eugenics, too many people today continue to embrace a dark-ages belief in the righteousness of price controls.
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
