A Limited View on Price Controls

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    Henry David Thoreau opens his essay on civil disobedience with the aphorism, “That government is best which governs least” and asserts the importance of a limited government that allows the people to decide what's best for them. Whether this statement is true politically is often a topic of debate, economically, however, this statement could not be more final. In most cases, the producers and consumers determine the most efficient equilibrium price and quantity of any good without government intervention. This economic truth is soon cast away by politicians, hoping to increase their own political clout, by placing price ceilings on goods and preventing the mechanisms of the economy to self-regulate. Placing a price ceiling on a good and expecting the price of a good to decrease without adverse effects is similar to declaring cancer illegal and expecting that all cancer patients become cured the next day.


When polled, economists largely agree that rent control negatively impacts housing in the long run


    Despite this price ceilings remain prevalent throughout the American economy, and both sides of the political spectrum seem to not grasp the idea that prices can’t just “come down” through legislation. A recent example of price ceilings, which has garnered major support, is rent control. The state of California plans to vote on Proposition 33, which will repeal an act that limits the state's ability to impose price ceilings on housing. The main slogan of the supporters is that this is a necessary measure to protect tenants from greedy landlords and solve the Californian housing crisis. However, these arguments fail to consider the adverse effect that an increase in rent controls will have on the supply of housing units in the long run. The number of housing units is unchangeable in the short run and only a small shortage is present. In the long run, when landlords can change the number and quality of housing units, a much larger shortage happens and the housing crisis is exacerbated.


In the short run, the shortage is small. In the long run, the shortage is drastic.


Comments

  1. Eric ZhouSeptember 22, 2024 at 8:25 AM

    Johnny your connection to economics is a refreshing take on the topic, it makes it easier to break down Thoreau's ideas, which in its essence really is just putting a 'price ceiling' on the government to force change.

    ReplyDelete
  2. Akein WeerakoonSeptember 22, 2024 at 12:59 PM

    Connecting civil disobedience to economics is an insightful view on the topic. This allows for a simpler explanation of the topic while also applying it to a similar concept in economics, which is a unique view of the idea.

    ReplyDelete
  3. AmberSeptember 22, 2024 at 7:03 PM

    I liked how you connected the purpose of Civil Disobedience to a topic you are more familiar with, economics. It shows your passion and knowledge of the subject and allows for others with similar knowledge to further understand Thoreau’s point of view in a way they could be more familiar with.

    ReplyDelete
  4. Karthik PrasantSeptember 22, 2024 at 8:16 PM

    I liked your connection to Civil Disobedience throughout your post. I found the connection with economics really interesting and feel like Thoreau's point of view can offer a unique perspective.

    ReplyDelete

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