“Governments controlling prices? It has long been unthinkable – but may now be inevitable” is the headline of an article by Andy Beckett in the Guardian.
He writes,
Politicians are not supposed to meddle with prices. Even though much of politics is about whether voters can afford things – especially in an era of recurring inflationary shocks – ever since the collapse of the Soviet Union’s planned economy four decades ago, the orthodoxy across much of the world has been that only markets should decide what things cost.
As the hugely influential Austrian economist Friedrich Hayek argued, in a complex modern society, information is too dispersed among potential sellers and buyers of goods or services for government to make informed and correct decisions about the prices of those goods. Hence, his disciples say, the inefficiency of state-run economies, from post-colonial Africa to the eastern bloc.
Yet as the 21st century has gone on, and market economies have proved ever less able to provide essentials such as energy and housing at an affordable cost – while also generating their own huge inefficiencies, such as soaring salaries for failing executives, and privatised utilities that don’t provide a functional service – so interest in the state regulating and even setting prices has started to grow again. Sudden bursts of inflation from wars, the pandemic and agriculture’s disruption by the climate crisis have prompted governments to make economic interventions that would until recently have been considered hopelessly old-fashioned, unnatural and even immoral. Even the Tories, one of the most stubbornly pro-market parties in the world, introduced the energy price cap, having previously called this Labour policy “Marxist”.
Hey, at least he’s heard of Hayek, and he is not wrong to say that the Tories introducing the energy price cap was a betrayal of their previous beliefs. Same goes for Michael Gove’s abolition of “no fault” evictions. I had thought better of Gove. I note that neither of these anti-free market moves did much to help the Conservatives at the subsequent election. Yet Mr Beckett is also right to say when left wing governments introduce price controls and rent freezes they are almost always immensely popular. It is not really a paradox. Human beings are good at spotting opportunism and hypocrisy on the part of other humans, but they are proverbially bad at weighing short term pleasure against long term harm.
I don’t believe Andy Beckett has mastered Hayek’s ideas. The ‘free market’ is the only way to go because the economic data is too coarse grained to control – but – there’s no guarantee that the process will be painless, only more efficient over time.
All the Government interference is aimed at reducing the pain of the ‘free markets’, but this (usually well intentioned) idea makes the market ‘unfree’ and the unintended consequences cause more pain and disruption in the longer term. Look at the history of rent controls, price controls and wage controls. If they ‘worked’ every Government would use them today. But they don’t.
Yes, but we’re not exactly saying that price controls have never worked and we’ve been aware of this since Hayek. It’s far worse than that. We’ve been aware of it since Roman Emperor Diocletian issued the Edict on Maximum Prices in 301 AD.
There are probably even earlier failing price control that simply aren’t well publicised.
I did not think better of Michael “Lockdown harder” Gove. And it is a tragedy that he has been put in charge of the Spectator magazine.
Want a shortage? Then have price controls. Want unemployment? Then have government edicts pushing up wages, or have government give powers to unions to obstruct (and blackmail) places of employment.
Want a collapse in private renting? Then have wage controls – or have regulations saying that property owners can not remove tenants once the period of the lease has expired.
Why bother to have a lease (a contract) if tenants can not be removed at the end of it? This is classic “Spanish Practices” – land owners in old Spain (and later many Latin American nations) did not improve their estates – because of the edict (“law”) that tenants could not be removed as long as “customary rent” was paid.
A just price is a free market prices, a just wage is a free market wage – any other definition of “just” is UNJUST. And if you can not remove people from your property – it is not really your property.
Dan Souter – that Diocletian, all of whose policies were insane (utterly insane) is declared a great Emperor by most “historians” who declare that Diocletian “saved Rome from the crises of the third century” shows just how intellectually bankrupt the universities (and so on) now are.
It is not “just” price controls (terrible though were and are), it is the creation of a secret police system (which soon became utterly corrupt), state factories, people forced into following the occupations of their fathers, and farmers being forced into de facto serfdom.
Along with an enlarged army, but with the traditional Legions destroyed (replaced by a multitude of smaller units – dependent on distant supply centers and unable to defeat enemy armies on their own) increasingly made up of barbarians (a policy pushed even further by Constantine) who hated and despised the people they were supposed to be protecting.
“market economies have proved ever less able to provide essentials such as energy and housing at an affordable cost”
Really? Market economies mandated expensive and unreliable “renewable energy” sources and is working toward shutting down the efficient and economically viable fossil fuel industry?
Market economies have mandated expensive upgrades to improve “energy efficiency” of houses causing costs to explode? Market economies have regulated and zoned and mandated housing policies to the point that construction of new homes has stagnated?
I love it how the Keynesians do everything in their power to stymie and undermine the free market and then, when their policies achieve their inevitable result, point at their own failures and exclaim “See? The free market doesn’t work!!!”
Did someone repeal the Town and Country Planning Act and the Climate Change Act while I wasn’t looking?
“…market economies have proved ever less able to provide essentials such as energy and housing at an affordable cost…”
We don’t have market economies though do we? Governments just can’t resist interfering and then go on to blame anything but themselves when things don’t work properly.