Wednesday, June 29, 2011

How to make a bad problem worse? Pass a law to "fix" it.

I’ve come to think that there is an iron law of intervention: if you want to make a problem worse, pass a law to fix it. Price controls create shortages: when the price isn’t allowed to rise to coordinate the wants of buyers with the wants of sellers, shortages result. The cruel irony is that any “benefit” for those we are trying to help is frittered away because people who aren’t allowed to pay for something with their money will pay for it with their time. Passing a law doesn’t change what someone is willing to pay, but it changes how they pay.