Economic reality is not optional. Government-imposed price ceilings and price floors — although believed by those who view prices as arbitrary results of bargaining or of “power” relationships as merely changing the distribution of economic gain or pain — distort people’s view of economic reality. Price controls prevent people as consumers (including as employers of workers) and as producers (including as workers) from seeing economic reality as clearly as possible. Blinded by minimum-wage commands and other price controls, people act in ways that are the opposite of the ways that those who support the price controls ostensibly want people to act. Rent control, for example, prompts landlords and potential landlords to offer fewer rental units on the market. Minimum-wage commands lead employers to employ fewer low-skilled workers.
Non- (and poor) economists, seeing only that which is in front of their noses, observe the government-controlled prices and conclude that the results of these controls must be just what the government publicly proclaims it wishes these results to be. “Look! Rents are lower with rent controls! Wages are higher with minimum wages! We have helped the poor!”
Those who fall for such superficial appearances, of course, do not grasp the nature of market forces and the role of prices. But the naiveté of such people runs much deeper: they are the sort of people who believe that if the messenger is forced to lie, the underlying reality changes, with the lie thereby converted into truth. Such people, in other words, believe in miracles. They believe that state officials performing incantations can miraculously change economic reality.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2018-05-16.
September 13, 2020
QotD: Price controls versus reality
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