Few policies elicit more contempt among economists than price controls. They don’t work. We know they don’t work. And we are not surprised they don’t work. Indeed, whenever price controls are tried, you can be sure that their champion has misdiagnosed the problem they intend to solve.
William J. Luther is an associate professor of economics at Florida Atlantic University. [ Courtesy of William J. Luther ]
It was surprising, therefore, to see price controls featured so prominently in the economic platform Vice President Kamala Harris released in August. She blames corporate greed for higher prices and thinks price controls are the solution. She’s wrong on both counts. Her policy agenda would jeopardize the current upward trajectory of the Sunshine State’s economy.
Florida has experienced remarkable economic growth over the last few years, a testament to the effectiveness of free market policies. Our state and local elected leaders keep taxes and government spending low and generally refrain from meddling with the market. The Fraser Institute ranks Florida second in the nation on economic freedom. The state’s free market policies foster entrepreneurship and innovation. Consequently, Florida’s real gross domestic product has surged by nearly 22% since 2019, more than double the national average.
Perhaps more than any other state, Florida understands that government price setting leads to shortages and poverty. We are home to more than one million Americans who were lucky enough to escape the disastrous socialist economic policies imposed on their countries of birth. They know firsthand, and through the ongoing accounts of their less fortunate family and friends, that those policies lead to breadlines, black markets and economic malaise.
These expats know inflation isn’t caused by corporate greed. It results when the government spends too much and prints money to pay for it. With more money chasing too few goods and services, prices rise — disproportionately harming those on fixed incomes and exacerbating the cost-of-living crises that policies like price controls purport to address.
Rather than cutting the deficit, Vice President Harris promises to “pass the first-ever ban on price gouging on food.” She would empower government bureaucrats to determine whether a loaf of bread or a piece of fruit is overpriced, just like Cuba and Venezuela do.
Vice President Harris also has endorsed a plan for the government to cap rental prices and stated that the government must stop the algorithmic software companies that landlords use to get a sense of their properties’ market value. Almost immediately following her proposal, the DOJ followed up by issuing a lawsuit against this software. Ashley Moody, Florida’s attorney general, wisely chose not to co-sign on behalf of the State of Florida.
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If the federal government sets maximum prices that can be charged, Florida’s farmers will be discouraged from growing more crops and the state’s developers from building new housing units. These entrepreneurs will be less inclined to take on the risks associated with production if they cannot charge the market-determined prices for their products. As a result, we will have less food, less affordable housing and slower economic growth.
Florida is home to tens of thousands of farmers who work hard to put food on American tables. Its housing industry is already struggling to keep up with demand, which has caused rental rates in places like St. Petersburg to increase by nearly 30%. The people who make these two industries hum in our state need pro-growth, free-market policies, not growth-destroying price controls.
Florida’s leaders should follow Attorney General Moody’s example and take a stand for market-determined prices. The command-and-control economic ideas embraced by Vice President Harris will not make Floridians better off. Indeed, they risk transforming Florida into the kind of limited-economic-freedom, low-economic-growth place that many of its residents have escaped. Those who have taken refuge in the Sunshine State deserve better, as do the rest of us.
William J. Luther is an associate professor of economics at Florida Atlantic University.
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Publish date : 2024-10-10 00:05:00
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