From the Archives: Are We Really This Stupid?

Sometimes it seems like it. Consider the following

Not a week goes by without at least one disturbing poll showing that people around the world lack a sense of history or an understanding of finance, or both. A large majority in a major US political party thinks it’s okay to force citizens to take experimental medical treatments. Majorities in many, if not most, European countries think central bank digital currencies will make life more convenient. Those same people also seem comfortable with governments jailing citizens for tweets.

With this shocking level of cluelessness in mind, consider a highly plausible near future: Central banks lower interest rates dramatically, which ignites another bout of inflation. Governments then impose price controls to get the genie back into the bottle. Polling suggests that many Americans will approve.

Here’s a 2023 post on the concept of price controls.

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Are We Too Dumb To Survive?

Originally published December 13, 2023

CBS News just conducted a poll that paints Americans as too economically illiterate to deserve a future of freedom and prosperity. Here’s how Tom Woods, author of Diary of a Psychosis: How Public Health Disgraced Itself During COVID Mania, addressed it in a recent mailing:

Sometimes you look around and see signs of hope. And you're not being deceived: there legitimately are signs of hope.

And then something like this happens, and you remember how much work there still is to do — even among people who consider themselves cheeky and courageous:

So even a majority of Republicans think enacting price controls would be a good idea to fight price inflation, as if there isn't an avalanche of world experience and scholarly work to the contrary on this very topic.

Price inflation is caused by government-established central banks increasing the supply of money and credit. Trying to force prices down after central banks have done this is like giving CPR to a dead man.

Price inflation is not a question of producers suddenly deciding to squeeze the consumer. If it were, why didn't they start doing so a year earlier? Were producers not greedy then? Looking at price trends, do producers become greedy, then curtail their greed, then become greedy again? You can see how juvenile this way of thinking is.

But anyone in that poll who thinks it's a sensible idea to have the government crack the skulls of producers whose prices they wish were lower is frankly an idiot. Such people think we're dealing with wicked producers who can arbitrarily set their prices at any level they choose. The field of economics may as well not exist.

How and why price controls fail

The idea that an enlightened “Philosopher King” can successfully control wages and prices dates from at least the Roman Empire and has been tried multiple times in the subsequent 2+ millennia.

It usually begins with a government overspending, overborrowing, and then debasing the currency to hide its own mismanagement. Prices begin to rise as a tsunami of ever-cheaper cash chases a finite number of real things. The public demands that the government “do something,” and desperate leaders respond by identifying “correct” prices and forbidding sellers from charging more.

But the vast majority of things that people buy don’t have precise definitions, so sellers start cheapening, shrinking, or otherwise adulterating their products and services to avoid going broke. As an example, let’s take the venerable tonsillectomy (which is apparently still a thing). Assume the government decrees that henceforth the procedure will cost $15,000 — without realizing that it involves about 50 different decisions ranging from the type of anesthesia to the number of nurses in the operating room to the amount of time the patient remains hospitalized post-procedure.

Hospitals respond to a fixed price in an inflationary environment by choosing cheaper options for each part of the procedure, making it less pleasant and more dangerous for all concerned. In other words, the bill remains the same but the product degrades, sometimes catastrophically.

Now spread this kind of degradation across an entire society — food, air travel, local government services, etc — and you end up with most things not working as well, taking much longer, or being simply unavailable.

Based on the amount of debt that’s accumulating, we’re headed that way fast. So after the coming recession and massive new round of QE, expect rising prices and calls for various kinds of wage and price controls. And, based on the above poll, expect Americans to embrace the idea.

As for where it ends, research the history of the Roman Empire, the French Revolution, and/or Weimar Germany, and you’ll find that they all have a common, highly unpleasant destination.