Mostly, this is a book about prices—the way in which they coordinate supply and demand, allocate labor and resources to their most efficient use, transmit signals to producers and consumers. As Reisman explains, prices are the mechanism by which the vast complexities of exchange are integrated on a continuing basis. So long as this system is allowed to function freely, there will be increasing efficiency in the use of capital and a rising level of satisfaction for consumers. But introduce the hand of government, as we have been doing for the past four decades, and the system will malfunction. First through inflation of the money supply, then through controls to contain the resulting rise in prices, the planners have relentlessly battered the sensitive mechanism of the market.
Stick for the moment to controls: by attempting to hold the price of a good below its market level, the government conveys erroneous signals to consumers and producers alike, pumping up demand and diminishing supply. The obvious result is shortage—of petroleum, natural gas, beef, rental housing, or whatever. In the absence of controls, Reisman shows, there could never be a “shortage” of anything, since even natural scarcity would simply mean a higher price. Controls are always and everywhere the sure progenitors of shortage.
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