Tuesday, August 30, 2005
The more things change ...
In 1947, Humphrey Michell published "The Edict of Diocletian" in the Canadian Journal of Economics (no link to the article found). The paper begins, "In 301 A.D., the Emperor Diocletian, with whom were associated his three co-rulers, promulgated an edict which fixed for the whole Roman Empire maximum prices for commodities, freight rates, and wages. According to the evidence available, and it is certain that the whole edict has not been recovered, price 'ceilings' for over 900 commodities, 130 different grades of labour, and a considerable number of freight rates were fixed and severe punishment promised to all 'black market' operators who dared to sell above the maximum. So elaborate a price scheme was not tried again until 1,600 years had passed ..."Unlike 301 A.D., we now have a fairly solid body of economic analysis along with corroborating experience that price controls are simply crackpot. If price does not ration, something else will -- and the something else can be distasteful (arbitrary allocations) as well as costly (deadweight losses). But this improved state of knowledge matters very little because, following natural disasters and/or price rises that inconvenience the many (as in oil), like clockwork, politicians cannot resist temptation and jump into the breach to "do something" about prices.
People not only get the politicians but also the newspapers they deserve. On prices, they all seem to be on the same page. This morning's LA Times includes: "California Watches Hawaii's Effort to Cap Prices."
It is as though a rare and noteworthy experiment is in progress.
