Priceless politics
Tuesday, February 27th, 2007I’ve always wondered how politicians get away with promoting programs and policies that contradict the most basic principles of economics. I thought maybe I was missing something, or that they are promoting the “greater good” when actually, oftentimes, politicians are banking on the resulting short-run market adjustments and aberrations to tout these popular, effect-at-first-blush policies and win votes. Afterall, if everything was in unlimited supply there would be no need for prices, and a politician really could manipulate them without negative after-effects. In a scarce world like ours, though, that doesn’t work. So politicians continue to declare different price controls at the request of the population at large. The people are temporarily appeased as gas prices are capped, wages have a floor, rent has a ceiling, or other manipulations are implemented, and the politician gets votes to keep them in office. Less obviously, some time later, the real effects of the price manipulations take their toll: You have to wait in long lines to get gas, wait months for a major medical operation, people lose their jobs or are replaced by less expensive automated machinery, and families are displaced from their apartments. Thomas Sowell has written a few good articles dealing with this same issue, Politicians Ignore the Role of Prices, and Obama’s Worn-out Economic Ideas. It’s worth reading both of them, which are short, because these excerpts hardly do it justice. Some excerpts:
With all the advances in sophisticated analysis by professional economists, very little of even the basic principles of economics has gotten down to the average citizen and voter.