Focus Point - The Folly Of Price ControlsCommentary by Pete du Pont
July 26, 2001
I'm Pete du Pont with the National Center for Policy Analysis. Oh, swell. Price controls are back.
They tried them in the Nixon Administration. They tried them in Ancient Babylon and lots of places in between. And they don't work because -- inevitably, without fail -- they break down.
The next breakdown is on energy price controls in California. In fact, price controls are already cracking, despite being only a few weeks old. And why is no mystery.
If people can buy something for less than the mark et price, they'll use more of it. And in California, at least 10,000 businesses have requested exemptions from temporary blackouts. Which means others must shoulder the burden. And now, California will be viewed as a riskier place to invest in power plants. Of course, the real answer to power shortages.
And just to make bad worse, as the NCPA's Bruce Bartlett notes, so-called temporary controls will last longer than anyone imagines, because the threat of catch-up price increases will be politically intolerable, so no self-aware pol will propose them. But the longer they last, they more severe their impact will be.
Those are my ideas, and at the NCPA we know that ideas can change the world. I'm Pete du Pont. Next time, money and politics.