When politicians decide which prices are wrong

National Review observes that the left and right have now converged on a single premise: that some prices are inherently wrong. One side calls it price gouging; the other calls it unfair foreign competition. The remedy, in both cases, is the same — a political authority that overrides what buyers and sellers would otherwise freely negotiate. I confess this convergence does not surprise me. The merchant who seeks a tariff and the legislator who caps a rent are animated by the same impulse: the belief that the outcome of voluntary exchange must be corrected by the superior wisdom of whoever holds the seal of office.

Let me be plain about what that impulse costs. When a price is held below what the market would set, the good in question — whether housing, grain, or medication — tends to grow scarcer precisely where it is most needed. When a price is held above the market by a tariff wall, the consumer pays the difference so that a narrow producer interest may be sheltered from the discipline of competition. In both cases, the loss falls on the many and the gain flows to the few who are well-positioned to lobby. I argued this at length in the case of the corn trade, where the landlord's interest was dressed up as the national interest, and I see no reason the argument has lost its force.

What troubles me most about the horseshoe the National Review describes is not that it is intellectually incoherent — though it is — but that it erodes the institutional framework that makes honest exchange possible at all. Markets require, for their proper functioning, that prices be permitted to carry information: about scarcity, about cost, about the relative urgency of competing wants. A political class that treats this signaling function as a nuisance to be suppressed when inconvenient will find, in time, that it has disabled the very mechanism by which supply finds demand. The shelves grow empty; the price caps are blamed on the merchants; the merchants are regulated further. I have read enough history to know how this sequence ends.

None of this is a license for any conduct the market will bear. I argued in The Theory of Moral Sentiments that commerce rests on sympathy — on the capacity of each party to imagine himself in the other's position — and that without this moral foundation, contract becomes predation. The firm that exploits a genuine emergency to extract the last dollar from a desperate family is not practicing free exchange; it is practicing extortion with a price tag attached. The remedy, however, is not a political cap that destroys the incentive to bring more supply to the emergency; it is the rule of law, robust competition, and the moral sentiment of a public that remembers who behaved well and who did not.

The question I would put to both sides of this horseshoe is institutional: what framework are you building, and who does it actually serve? A tariff that protects a domestic industry from competition is a monopoly grant dressed in patriotic cloth. A rent control that prevents new construction is a subsidy to current tenants paid by future ones who will find no housing at all. If the honest answer, in either case, is that the measure serves the organized interest that lobbied for it rather than the diffuse public that consumes the good, then the measure is mercantile restriction by another name — and the consumer, as ever, pays the bill.