Any time inflation begins to take a bite out of people’s wallets, you’re sure to hear politicians, pundits, and even some economists advocating price controls. Biden would like to command gas-station owners to lower their prices.
In this AIER essay, Don Boudreaux explains why price controls are always a bad policy. He writes:
No government intervention into a market economy is as certain to do damage as price controls. Market prices make possible the successful, productive coordination of the efforts of countless specialized workers and firms spread around the world. Market prices also coordinate the resulting massive flows of economic outputs with the demands of consumers.
Every government-imposed control on prices reduces the effectiveness of this coordination.
The people who complain about free markets just don’t comprehend how important the coordination function of prices is. Interfere with it and there will be a host of adverse consequences — as Boudreaux explains.
His conclusion: “The public often supports price ceilings — support that would surely disappear if the public understood the basic economics of this harmful government intervention.” So true, and that is why government should be denied any power to set price ceilings or price floors, or in any other way dictate the terms of transactions. The Constitution doesn’t actually give the federal government any such power, but the government has taken it on anyway, owing to “progressive” Court decisions in the 1930s.