Anyone with the slightest bit of knowledge about the subject knows what a disaster government price controls are. For instance, the 1970s were marred by an ill-fated policy first imposed by President Nixon, when in 1971 he froze wages and prices for 90 days, followed by a gradual repeal of the controls over the next several years. The gas price cap was the most memorable, which remained until 1980.
The results were predictable and painful. Shortages and long lines frustrated consumers for years.
“The price controls resulted in a fuel-rationing system that made available about 5 percent less oil than was consumed before the controls. Consumers scrambled and sat in lines to ensure they weren’t left without. Gas stations found they only had to stay open a few hours a day to empty out their tanks.”
Which brings us to Vice President Kamala Harris, who visits Raleigh today and is expected to announce her plan to rein in grocery prices with a federal ban on price gouging – which would effectively turn into an arbitrary price cap on food.
It’s amazing how often politicians refuse to learn from history.
Ryan McMaken of the Mises Institute discusses what happened in the 1970s when food prices were included in Nixon’s price freeze:
“Price controls on food led to predictably disastrous results. Under Nixon’s price controls, farmers couldn’t sell chicken products at prices high enough to justify the cost of feeding the chickens. In the early 1970s, farmers killed over a million baby chicks. Similar problems occurred in the beef and pork industries with farmers sending pregnant sows to the slaughterhouse while dairy cows were butchered.”
By not allowing prices to reflect the market realities of supply and demand (along with the inflated money supply), consumers had no incentive to economize and producers had no incentive to produce more. The results are shortages, long lines, and in the case of the food industry, mass slaughter of healthy animals.
Making matters worse is the vague concept of “price gouging.” How do politicians determine if a price is in violation of an “anti-gouging” law?
They literally just make it up, it’s entirely subjective.
As North Carolina Attorney General and gubernatorial candidate Josh Stein admitted recently:
“It’s not an objective measure. There’s not a percentage increase. It’s very subjective. And the law says unreasonably excessive price increases. And so part of it is the eye of the beholder.”
Stein is labeled as an “ally” of Harris’ plan to punish “price gougers,” yet admits the determination of gouging is completely arbitrary. How is a seller to know when they are violating price gouging restrictions? They’ll only find out after the fact. That’s like not posting any speed limits on the highways and letting the police arbitrarily pull people over for exceeding whatever speed the officer decides is “too fast” that day.
Government price caps have a consistent history of disaster. Compound that with the fact that price gouging is a completely arbitrary concept for which it is impossible to know if you are violating until it is too late. Harris’ proposal is ignorant of economics and destructive. Moreover, it completely does nothing to address the true cause of inflation, which is runaway deficit spending financed by newly created money.
