Price Controls from a Classical Liberal Perspective
Abstract
Governments often seek to control market prices, imposing ceilings or floors. The practice has been applied to agricultural products, cable TV rates, labor market services, and just about everything in between. Efficiencies are typically sacrificed, as perverse signals are communicated about supply and demand values, and virtually every basic price-theory text charts the shortages (from ceilings) and surpluses (from floors) that predictably result. Classical liberals criticize such policy interventions as creating socially costly misinformation and undermining social coordination, and they express additional concern over the distributional consequences. When incumbent tenants are protected from rent increases, future (and often less affluent) renters are discriminated against; when minimum wages are established by law for a given class of workers, competing workers (often lower income immigrants) are discriminated against. Some of the most aggressive and brutal forms of price regulation have been instituted, in fact, to promote racial discrimination, as in the Colour Bar, the predicate for South African apartheid.