Americans favor price controls. The results are striking:
- Democrats: 75%
- Independents: 62%
- Republicans: 54%
Support for price controls is now the majority view across the board.
In July 2006, Russ Roberts interviewed Milton Friedman, just days before Friedman’s 94th birthday and less than four months before his death.
Russ brought up gasoline price controls and the lesson learned from their obvious failures in the 1970s. Friedman responded with a warning. Americans’ resistance to price controls rested in part on living memory of what had happened: “After there’s nobody living who had experience with price controls, I wouldn’t be surprised to see it come back again.”
Americans, Friedman explained, were then only 20 or 30 years removed from the gasoline controls of the 1970s. A large share of the population still remembered the shortages and lines personally. Once that generation disappeared, he expected the idea to become politically attractive again.
“Twenty or thirty years from now.” That was Friedman’s estimate for how long economic knowledge acquired through painful experience might take to depreciate.
Here we are, 20 years later. It’s 2026, and price controls are attractive again. New York is now the poster child for them, having elected a mayor who explicitly ran on government price-control policies, whether through mandates or the direct government management of retail. As I watch this news, the ghost of Milton Friedman is living rent-free in my head.
Price controls are one of the flagship ideas of economic illiteracy.
Prices are not agents you can control. They are signals. They tell us about the relative scarcity or abundance of the goods and services around us. This goes back to the basics of economic thinking: human beings have innumerable goals and ends, but limited means and resources with which to realize them. Prices allow us, both as individuals and as a society, to decide how those means should be allocated among our goals. They are information.
In modern language, you want prices to be connected to the source of truth. That source is the market. When you manipulate prices by decree, you disconnect the signal from the underlying economic reality. Yes, the world feels more abundant the moment you fix or reduce the prices of basic goods and services such as rent or groceries. You feel as if there is more food or more housing. You feel as if you are living in a more abundant world.
But you are not. The scarcity that existed before the price was fixed did not disappear when the price changed. We are now living in a falsely abundant world. The shortage has not disappeared. What has disappeared is part of the signal telling producers how urgently additional supply is valued, along with part of the reward for supplying it. FEE is developing a new interactive experience, rentsohigh.org, to help people see how restrictions on housing supply make scarcity, and therefore high prices, worse.
As Tyler Cowen and Alex Tabarrok say, prices are signals wrapped in incentives. A higher price tells producers, “We need more of this. If you give the world more of it, you will be rewarded accordingly.” That draws resources toward the things we need most, whether workers into construction or arable land into farming. Fix the price, and you corrupt the signal and break the incentive system.
Price controls are a trick. They are not economic thinking. They are political thinking: the use of power to alter a world built on human cooperation. They make people feel that someone is being punished, whether landlords, capitalists, or private equity, while someone else, such as shoppers or renters, is being rewarded. Our minds are more naturally wired for political thinking than for economic thinking. So yes, price controls will always be politically attractive. It is the task of economics to prevent politics from running us into poverty.
And economics does not go away because scarcity does not go away. You cannot “defeat” economics. You can try to control prices, but you cannot control costs. If scarcity is real, the cost will still be there, waiting for you to pay it.
If you prevent the price of a $2,000 apartment from rising to $2,500, something else has to give. Demand will exceed supply, so search times will increase. You will pay with time. The incentive to keep the apartment in good condition so that it can command a higher price will weaken. You will pay through lower quality and poorer maintenance. Your ability to express the intensity of your preference by bidding more than another potential renter will disappear. You may instead have to pay through personal connections.
The economic reality is still there. The cost is still there. That is why price ceilings turn money prices into other forms of payment: gasoline lines, housing queues, longer waits for appointments, deteriorating quality, favoritism, black markets, and, in the most extreme cases, empty shelves and bread lines.
Even if you say, “I would rather wait in line, defer my satisfaction, or postpone my healthcare,” remember that the incentives to increase supply have also been reduced. That means less production of the goods and services people need. Even if the money price remains fixed, scarcity will be greater than it otherwise would have been, so the real cost will rise.
Price controls are not cost controls. The difference between a price and a cost is something everyone should learn in a modern, complex society. But we are not learning it. As Friedman said, the lived experience of economic disaster is receding behind us. And, as I wrote last week, we have oversupplied our intellectual landscape with bad translators of economics.
When Friedman said that we lose our understanding of bad economics as those who lived through it disappear, I hope he was not saying that experience is the only teacher. I know he was not, because he was one of the greatest teachers of economics the world has ever seen.
But he was looking at a world in which economic phenomena were increasingly taught not through an economic lens, but through whatever political lens happened to be fashionable. We subordinate economics to politics. We subordinate social cooperation through market processes to collective action through political antagonism.
I have lived through a great deal of bad economics. I grew up in an inflationary, protectionist, price-controlling Brazil. I saw immense gasoline lines when the government controlled fuel prices. I saw people pay through risk for contraband goods they could not legally import. I saw, and still see, Brazilians fly to Miami to shop while the poorest Brazilians are forced to pay high prices at home.
But I also came to understand the consequences of political control by reading great economists. Studying Friedman, Hayek, and others gave me the concepts to understand what the hell was actually happening around me.
And here I would go further than Friedman: living through economic disaster is not enough. I have watched a country move from one economic disaster to another without ever fully understanding what went wrong the first time. Much of the world lives this way because most of the world never had a Milton Friedman explaining what the hell is going on. People experience inflation, shortages, protectionism, capital controls, and black markets, and they don’t necessarily develop an economic theory capable of explaining them. Experience supplies the evidence, but it’s economics that supplies the explanation.
Without economic thinking, even the most obvious economic failures can find a political excuse: “The policy didn’t go far enough,” “The wrong people were in charge,” “Corporations sabotaged the policy,” etc. As Ludwig von Mises warned, the failure of intervention too often becomes the justification for more intervention. Economic understanding does more than help us recognize prosperity when we have it. It gives us the intellectual equipment to understand economic failure while we are living through it.
I do not know how far New York or any other American experiment with price controls will go in the coming years. But I am certain of this: unless we make a serious effort to teach economic thinking, help a new generation understand the economics of economic failure, and cultivate a deep appreciation for the marvel of modern market cooperation, that poll will be more than lamentable. It will be a warning of worse things to come.
I often use this space to mention the things FEE is doing to improve economic understanding: producing videos and seminars, running the Economics Olympiad across our country and continent, developing new and more scalable versions of FEE’s traditional seminar, and creating new engaging competitions. As part of our most exciting competition running this month, over 100,000 people have taken our milliondollarquestion.org quiz, which challenges Americans to grapple with the economics behind the affordability crisis. Among those who completed the 10 questions, a majority of 56% conclude that subsidies and regulations make major expenses more costly.
Friedman’s lesson can still be learned. The problem is that every generation has to learn it again.
I am a supporter of FEE and recommend the organization. In an era in which Republicans as well as Democrats are embracing socialism and radical policies, there are still several think tanks, advocacy groups, and publications speaking the truth and resisting the post-liberal politics of the era. One such organization is FEE. To learn more about FEE, follow this link.
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