“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.
High energy prices are government policy.
Let’s see, the UK government has been meddling with energy and housing prices for…well, pretty much forever. There is exactly NO free market in either of these things, and then they have the gall to claim, “market economies have proved ever less able to provide essentials such as energy and housing at an affordable cost…”
How the hell would the serfs of the UK know what a free market is if they’ve NEVER HAD ONE?
The BBC might have just noticed an issue here, in the following article: Where have weekend jobs for teenagers gone?
And it states this:
The point these garbagemen dolts are deliberately missing is that the government can’t simply
decree goods and services into existence. If the government tries to dictate a price below
the market price, the goods won’t be available at all. We’ve all experienced this so many times
that no adult can possibly be unaware of it.
Right wing governments have taken their turn. I remember Nixon’s wage and price controls back in 1971. (I’m old.)
Very popular for about 9 months, until everything went to hell specifically BECAUSE of his controls. He had a Wage Board okaying wage increases, a Price Board checking on price rises, and his (unfortunately named) NEP – his New Econ Policy.
Everyone liked it until their own oxen got gored. And everyone’s oxen DID get gored, eventually.
See the argument they seem to allude to is “price controls are not right or proper, but things are so bad we need to accept the lesser of two evils.” But that is so far from the truth. We don’t want price controls because they don’t work, they make things worse, they are without exception disastrously bad.
Nobody else has said it so I will — the only quicker way to destroy a city than rent control is aerial bombing. Though, FWIW I have an amendment to that: the only two quicker ways to destroy a city than rent control are defunding he police and aerial bombing.
Irrespective of the moral argument about private property (which of course is entirely sound) it is just the simple practicality of it all. And it is a troubling deception. The government makes it worse but hides the cause, so people demand the government do more. It reminds me of a story I once read from 1910s, where they reported on this stray dog who lived by the Tiber river in Rome. The dog used to push children into the river then jump in to save them. When he rescued the kids he would get lots of rewards from the grateful passers by.
bobby b.
President Nixon is supposed to have said “conservative men – liberal measures” – (he claimed this line came from Disraeli – although why anyone should want to copy the waste-of-space Disraeli, President Nixon did not explain) – President Nixon seems to have defined “liberal” as ever-bigger-government and ever-more-interventionist government – which does not sound like most of the liberals of Disraeli’s time (it sounds more like Disraeli himself – and his friend the Earl of Derby), but perhaps it fits some liberals even then.
As for how can endless do X and be Y (“conservative men – liberal measures”) President Nixon did not explain this either – indeed it can not be explained, because it is an irrational statement, it is senseless.
But then we are dealing with someone who crawled to Mao – perhaps the largest scale mass murderer in human history.
And the media (and education system) treats this despicable action, this crawling to a monster, as something GOOD that President Nixon did.
But “they” aren’t playing a long game. They’re playing a game where time runs out on the next national election day.
If they can control the bubbles until people vote – and thus are still thinking “these controls are working!” – that’s really all they need, in their own minds.
They’ll deal with the disastrous consequences during their NEXT term, when they will undoubtedly have wider powers and more support. If they can just get us over the line into real socialism, all will work out, because they’ll ORDER it to work out!
(The socialists’ method of control reminds me of a great way to save money on heating your home in the winter. Put a candle next to the thermostat. The heat will never switch on, and you’ll save lots of money!
Of course, your house gets colder and colder until you all die. That’s the bubble. But that’s just a pesky detail to them.)
bobby b – cynical, but most likely true.
For example, the price control antics of President Nixon in 1971 only had to “work” (if only as Public Relations) till the election of 1972.
After that “who cares – a President can only be elected for two terms anyway”.
Mr Becket is echoing the complaints of Gunter Riemann in his excellent little book written in 1939” The Vampire Economy.” In which he successfully eviscerates the insanity of the Nazi economy bursting with layers and layers of regulatory boards, raw material rationing, controls on wages and hiring. Und so weiter. And very nutty it all was. Being a commie Riemann proposed junking all this FDR on speed nonsense and going for the old government ownership of the means of production distribution and exchange.
It’s true that business owners perform poorly when bound and gagged and robbed blind. But socialists pretend not to be aware that the problem light lie with the binding and fagging rather than the business geezer.
Lee Moore – yes Gunter Riemann diagnoses the problem of the vile National Socialist (Nazi), but his proposed “cure” of total statism would (as you know) have made things dramatically WORSE.
Even with vastly greater natural resources (raw materials – and farm land) than Germany – the socialist Soviet Union had many millions of people starve to death in the 1930s and the rest of the population lived in terrible poverty.
Did the establishment elite around the world really “not know” what was happening in the socialist Soviet Union? My father, Harry Marks, knew (which is why he left the Communist Party in the 1930s) – and he had no special sources of information.
I do not believe that the pro Soviet Union people, or, at least, sympathetic to the Soviet Union people (such as the despicable “New Deal intellectuals” in the United States, in Western nations “did not know” – they knew, but they DID NOT CARE about the mass death and human suffering.
It was the same later with Mao – whose Marxist regime was, perhaps, the largest scale death-machine in human history – people such as Prime Minister Heath, President Pompidou and President Nixon knew – they just did-not-care.
And note that the three examples I gave were “conservatives”.
The Western establishment, including many “conservatives”, has been corrupted by Collectivist “Social Reform” (i.e. tyranny by the installment plan) ideas, for a very long time.