Cities have used rent control for decades as a way to keep renters from experiencing the price signals of bad policies enacted by local and state politicians, and it's been a disaster without escape all along.Prices are the balance between supply and demand.You can lower demand by creating alternatives. You can raise supply by removing obstacles to the natural tendency for supply to flow in wherever prices are rising. But a sure way to crash supply is to react to high prices by capping them in order to pander to voters who are deserting you in droves. It's an especially unsavory form of pandering when the price shocks your voters are experiencing result from your own boneheaded economic policy, but President Unity likely couldn't have understood economic principles even in what passed for his cognitive prime."Affordable" housing is meaningless if it's unavailable at the state-mandated price, just like "affordable" healthcare.
Couldn't agree more
I'm a big believer in price signals and a big doubter on erasing them.
F.Bastiat wrote on this after the French hyperinflation in the 1790's.
ReplyDeleteThe end result taken to extremes is slavery- if the money loses value, and the producers prices are capped, they just stop producing- then force is the only option left to get them to make anything, and of course, they will then produce at the minimum level of quality and quantity.
IIRC, at one time the during this inflation the French gov passed a law forbidding asking what form payment was to be made in, and also mandating the death penalty for conducting commerce in gold or silver, as a last ditch attempt to force conversion to the worthless paper currency.
The idiodic actions taken by a well financed government are bad enough, but when times get bad they really pull out the stupid stops.
Francis Spufford's excellent book 'Red Plenty'..part history, part novel..is about the realities of Soviet economic planning, as seen by those on the front lines of that system. One of the characters is a man named Chekuskin--a fixer. Before the revolution, he was a salesman: now, the economic problem is not selling, but buying. Chekuskin explains what a real salesman was, back in the day:
ReplyDelete"You're thinking of some fellow who works in a sales administration, sits by his phone all day long like a little king, licks his finger when he feels like it, and says, You can have a little bit. That's not a salesman. You see, the world used to be the other way up, and it used to be the buyers who sat around examining their fingernails, hard enough as that is to imagine. A salesman was a poor hungry bastard with a suitcase, trying to shift something that people probably didn't want, cause back in those days, people didn't just get out the money and buy anything they could get their hands on. They had to be talked into it.
But with Communism, the things changed. Back then, people didn't want to buy. Now, they don't want to sell. There's always that resistance to get past. Â But the trick of it stays the same: make a connection, build a relationship."
A society will either have salesmen, such as Chekuskin was before the revolution, or production allocators, like the ones the later Chekuskin tries to help his clients get around.
The market is a force of its own and keeps working like gravity even when people deny it. You can overcome gravity in many ways by expending energy, but it's still gravity, and when you stop expending that energy, the jet will come down.
ReplyDeleteIt is often worth it to expend energy - to take the time to invent things, or to help others. But the cost doesn't go away.