Price controls are government restrictions that make it illegal for sellers to raise prices, or that cap how high prices may go. In the episodes of The Bob Zadek Show excerpted here, the topic appears in three contexts: as one element of Venezuela’s economic collapse, as a listed topic in a discussion of the modern administrative state, and as the central subject of a 2022 episode on inflation and grocery prices. The recurring argument across the excerpts is that price controls do not control inflation and instead suppress the information that prices carry.
Venezuela: controls amid the destruction of the free market
In the 2017 episode on Venezuela, Bob Zadek asks guest Fergus Hodgson whether the country’s economy is socialist or communist and what has happened to private property, freedom of contract and the rule of law. Hodgson answers that in the formal or open market there is no free market anymore and no real capitalism, and that at most there is some cronyism Venezuela on the Brink with Fergus Hodgson (2017).
Hodgson lists the features of the economy: there is no stable currency, there are no property rights, property can be confiscated arbitrarily, and there are price controls on basically everything, in particular the exchange rates with foreign countries. He attributes the expansion of welfare programs to favored groups and the breakdown of the rule of law to the Chávez regime, saying that property rights were violated at will and that confiscations were selected personally and sometimes done on television as a show. He reports that more than a million Venezuelans have left the country since 1999, with exile communities in Florida, in Doral near Miami, and even in Ireland Venezuela on the Brink with Fergus Hodgson (2017).
Hodgson invokes Jacob Hornberger of the Future of Freedom Foundation, who used to say that the real free market is the black market, and says that is the case with Venezuela. He concludes that every principle of free-market economics is being violated and that this is why there is no economic growth and no investment Venezuela on the Brink with Fergus Hodgson (2017).
Price controls in the administrative state
The 2020 episode with Professor Richard Epstein about his book The Dubious Morality of the Modern Administrative State lists Price Controls among its topics, alongside the Administrative State, Constitutional Law, the Nondelegation Doctrine, the New Deal, Progressivism, Labor Law, the EPA and the Knowledge Problem The Dubious Morality of the Modern Administrative State (2020). The excerpt provided consists of episode metadata and a description of the conversation’s themes; it does not contain the discussion itself, so it establishes only that price controls were among the subjects treated and not what was said about them.
Inflation, greed and the futility of controls
The 2022 episode with Don Boudreaux opens with Bob Zadek asking for an explanation of inflation and why it adversely affects people. Boudreaux defines inflation as a reduction in the purchasing power of the money unit, so that it takes more dollars to buy the same thing, and says it is caused by an increase of purchasing power beyond the increase in the amount of things to buy, which happens when government injects more purchasing power into the economy Liz Warren’s Crusade against “Big Grocery (2022).
Boudreaux argues that the recent injection of purchasing power coincided with a government-engineered obstruction of production, and that the inevitable result is a rise in prices. He explains that prices and wages do not rise at the same time: purchasing power is injected at particular points, those who spend first buy at low prices, and the rise in prices is staggered while wages usually lag, so workers are made worse off in real terms. He adds that inflation creates uncertainty because entrepreneurs cannot tell whether a price rise reflects consumer demand or merely inflation, which stymies investment and risk-taking Liz Warren’s Crusade against “Big Grocery (2022).
Zadek then turns to the political response. He says it is a standard device for government, when at fault, to look around for another demon and direct public attention to a non-governmental actor, and that some economists, having caused the problem of inflation, now resort to price controls, sometimes called wage and price controls. He asks Boudreaux to explain what those words mean and how insidious the cure is Liz Warren’s Crusade against “Big Grocery (2022).
Boudreaux answers that price controls are the government prohibiting or restricting how high sellers may raise prices, with fines or jail for raising them too much, and that while government can with enough force prevent people from raising prices, that does not control inflation. He quotes Milton Friedman’s analogy that controlling inflation with price controls is like putting a little metal strip into a thermometer to prevent the mercury from rising: you can stop the thermostat from registering the correct temperature, but that does not change the room temperature, and if you thwart the thermostat the heating system stops altogether. He calls price controls a lie and a command by the government to every seller to lie to the economy about the real value of the things they have to sell, and offers the analogy of a mayor ordering newspapers to report a false, lower murder count, which does not change the underlying fact that people are being killed Liz Warren’s Crusade against “Big Grocery (2022).
Boudreaux recalls August of 1971, when Richard Nixon imposed a nationwide wage-price freeze on all prices and wages in an attempt to control inflation, which he calls a terrific failure; he says Nixon himself understood it would not work and did it for political advantage, and that wage-price controls have never worked for any of the things they have been attempted to be used to do. He compares economists with degrees who propose wage-price controls to people with physics degrees who proclaim the possibility of building a perpetual motion machine Liz Warren’s Crusade against “Big Grocery (2022).
Zadek adds that price is information, used by buyers and sellers to allocate resources and time. He gives the example of a used car worth $25,000 on a functioning market that government controls would require be sold for $10,000: the owner will either refuse to sell, denying himself the money and denying a willing buyer the car, or the deal will go forward in an underground garage, in the black market, in the secret economy. He says the White House as recently as the previous month had looked somewhat fondly on wage and price controls, and that Jen Psaki, in a December press conference complaining about meat prices, indicated that the White House and the Department of Agriculture were looking at wage and price controls to stem what was called corporate greed. He concludes that notwithstanding Nixon’s sorry experience in 1971, certain bad ideas never seem to die Liz Warren’s Crusade against “Big Grocery (2022).
Boudreaux agrees, calling it economic ignorance of an indescribable degree and politically convenient blame deflection. He says enough Americans remember the 1970s and the experience with wage-price controls and price caps on energy, and that one of the first things Ronald Reagan did, which he thinks was his very first official act as president right after being sworn in in January of 1981, was to eliminate the price controls on energy; there was an immediate spike in energy prices, including gasoline, and then they went right back down because sellers were inspired to get back into the market. He says the Biden administration and the likes of Elizabeth Warren are insulting the intelligence of most Americans Liz Warren’s Crusade against “Big Grocery (2022).
Across episodes
The topic appears in three episodes, but only two develop it. Hodgson in 2017 treats price controls as one item in a list of violations of free-market principles in Venezuela, alongside confiscation and the absence of property rights. Boudreaux in 2022 treats price controls as the central subject, supplying the definition, the Friedman thermometer analogy, the Nixon freeze of 1971, the Reagan energy decontrol, and the used-car illustration of prices as information. The 2020 Epstein episode lists price controls among its topics but the excerpt does not contain the discussion, so no position can be attributed to Epstein from these sources. The excerpts show no development of the argument between the earlier and later treatment; the later episode supplies the mechanism and the historical examples that the earlier one does not.
What the sources do not cover
The excerpts do not state the outcome of any price-control regime beyond the general claims that controls fail and that Venezuela’s economy lacks growth and investment. They do not give the text or name of any statute or executive order, the holding of any case, or the amendment any case turned on. They do not state the title or field of any speaker beyond what the labels provide, and the Epstein excerpt contains no discussion of price controls at all. The Boudreaux excerpt ends mid-sentence, so any further argument he made is not available here.