Quotation of the Day…

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… from page 21 of my Mercatus Center colleagues Chris and Rachel Coyne’s essay “The Economics of Price Controls,” which is chapter 2 of Flaws & Ceilings (2015), an excellent collection edited by Chris and Rachel:

Price controls are often implemented with the goal of fighting inflation. But this, incorrectly, assumes that all wage-price increases are the result of inflation. In an unhampered market economy, there are constant, genuine changes to supply and demand conditions that will often lead to real price increases and relative price increases. The existence of price controls distorts the ability of the price mechanism to communicate this information by treating all price changes as if they are the result of inflation. The result is that scarce resources will not be reallocated to meet changes in the real, underlying economic conditions. Thus, due to persistent resource misallocations, standards of living will suffer.