Unintended Consequences of Price Controls

Students: Hear Antony Davies live at the Exploring Liberty http://lrnlbty.co/x5Zi3P or Scholarship and a Free Society Seminar http://lrnlbty.co/wz3Ao9 this summer

Prof. Antony Davies explains that prices are not levers that set value, but rather, are metrics that respond to value. Therefore, since government cannot legislate value, attempts to control prices will generate unintended consequences. Using the minimum wage as an example, Davies demonstrates that minimum wage laws increase unemployment rates amongst low-skilled workers.

Watch more videos: http://lrnlbty.co/y5tTcY

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Education

Tags:

• unintended
• consequences
• price
• controls
• economics
• poor
• minimum
• wage
• price fixing
• price floor
• price ceiling
• shortage
• surplus
• government
• public
• policy
• unemployment
• minimum wage
• learn liberty
• liberty
• video
• freedom

[DrTodd13]

Any discussion of this topic that doesn't mention the mobility between income levels is incomplete. The "poor" are not a constant sub-class. Those new to the work force with low skills are today's poor but by accumulating work experience they do not stay poor.

[LearnLiberty]

@DrTodd13 Prof. Horwitz addresses that very issue in the video on our channel called: "Are the Poor Getting Poorer?" You should check it out and let us know what you think. youtube.com/watch?v=vDhcqua3_W­8

[niklasbastholmhansen]

Wow, more knowledge in 5 mins. than most 5 hour seminars supply....

[LibertyDownUnder]

It's ironic that almost all the advocates of minimum wage are politicians who started off as unpaid interns.

Some as lawyers, politicians, stock brokers - all of which start off at $0.

[jontycampbell]

So, let me understand this: the rich are getting richer AND the poor are getting richer, but the lower waged earnings are rising, yet way, way slower than the upper wage grades. So it's like two cars on a road, one slow one fast, they're both making progress, but the gap between them expands, so giving the ILLUSION the of getting poorer (I'm excluding inflation here), if we simply focus on the gap between them, if you get my drift.

[jontycampbell]

@PhilosphyBeast " Monopolies, tax breaks for special interests, govt. regulation (good & bad), financial fraud, corporate crime, collusion, etc." Indeed, as you have shown, that is not a free market. The question remains, why would price fixing remedy oligopolies & monopolies, particularly as price fixing is a key feature of oligopolies and monopolies? The more firms there are to choose from in a market, the wider the variance in price/quality and the freer it it tends to become.

[jackiechan511]

@Gatedialer The main difference between the 1970s versus pre-2008 crash is that 1970s we had a legitimate supply/demand issue whereas the pre-2008 crash saw oil price increases unecessarily when supply/demand are stable

[redcups21]

I'm sorry but this just makes too much sense

[Gatedialer]

@jackiechan511 Like in the 1970s, when there were price controls on gasoline. That worked out really fucking well, huh?

[jackiechan511]

This may sound good in theory but price ceilings are needed if industry increases prices with no economic foundation. For example, the price increases in oil up to the '08 crash. It seems that the oil markets/rogue speculators can increase prices with any pathetic excuse in the book, and this is when supply/demand are stable. In cases like this, a price ceiling will put a stop to it.

[tasteslikechimp]

@DOHC2L I believe you took the first part of my claim out of context. My point was that when a policy has a large impact on a small part of society but little impact on everybody else, it is misleading to look only at society in general for the effects of the policy. A meaningful study must also examine the part of society that bears the greatest impact. Perhaps there is an error in my reasoning or I'm being unclear, but you seem to be making a semantic distinction unrelated to my point.

[DOHC2L]

@tasteslikechimp "Perhaps "improper aggregation" is a better term than "misnomer," but the point remains."

It's an inductive type argument. Think critically - the fallacy is caused by assuming a conclusion to be true and therefore 'rationalizes' the assumption. Invalid assumptions are hard to perceive because the (errant) conclusion includes valid claims about reality, but which-for are valid for different reasons than you've alluded to. Trust me I'm a logician & economist.

[tasteslikechimp]

@DOHC2L Perhaps "improper aggregation" is a better term than "misnomer," but the point remains. By reductio ad absurdum, the minimum wage in South Dakota has a negligible effect because it doesn't raise measured unemployment in North America. The impact on total unemployment is a necessary, but not a sufficient, analysis. Taken by itself, is is simply the fallacy of division.

[DOHC2L]

@tasteslikechimp "Also, the notion of "slightly higher" unemployment is a misnomer. It's true for society at large--since most people earn more than the minimum wage already, it's not a binding price floor for them."

No, your argument isn't valid. Saying "...since most people earn more than the minimum wage" doesn't affirm the claim "slightly higher unemployment is a misnomer". That's flawed logic. To be more precise, you committed the fallacy of rationalization.