CryptoregulationPolicy Debates
Should the government just ban high prices?
The perennial political temptation to cap prices during periods of public discontent is resurfacing with renewed vigor, echoing historical patterns that veteran observers will find deeply familiar. At its core, the debate pits immediate political expediency against long-term economic stability, a tension as old as governance itself.Voters, feeling the pinch of high costs, are demanding relief now, not in some distant future when supply-side reforms might finally bear fruit. In response, figures like New York City's mayor-elect Zohran Mamdani, campaigning on a promise to 'freeze the rent' on stabilized apartments, and New Jersey's incoming Democratic governor, Mikie Sherrill, vowing to cap electricity rates, are channeling a sentiment that has toppled administrations throughout history.Yet, the economic consensus, forged in the fires of past failures from Nixon's gasoline price controls to San Francisco's rent stabilization laws, warns that such measures are profoundly counterproductive. They distort the essential signaling function of prices, which coordinate economic activity by indicating scarcity and incentivizing production.When a price cap is imposed, it discourages the very investment needed to solve the underlying shortage, be it in housing or energy, ultimately exacerbating the affordability crisis it was meant to solve. The recent op-ed by former Biden administration official Bharat Ramamurti and economist Neale Mahoney, arguing for temporary controls as a political bridge to more substantive supply-side solutions, represents a sophisticated but ultimately flawed attempt to reconcile this conflict.Their proposal underestimates the profound political difficulty of letting 'temporary' measures expire, a lesson New York learned after its post-World War II 'emergency' rent controls stubbornly persisted for decades. Furthermore, price controls are a blunt and often regressive instrument for addressing inequality; they do not target aid to the needy but instead cap prices for everyone, including the wealthy, while functioning as a de facto tax on production.A more prudent, though politically challenging, path involves a two-pronged approach: aggressively cutting regulatory red tape to boost the supply of critical goods like housing and energy, coupled with targeted fiscal transfers—funded by taxes on the affluent—to directly aid those struggling with costs. This method addresses the root of the problem without crippling the market's ability to respond, a strategic imperative that transcends the fleeting appeal of simplistic mandates.
#price controls
#economic policy
#rent control
#inflation
#housing supply
#affordability
#featured
