There is a positive relationship between the amount of governmental interference in an economic arena, and the abuse and invective heaped upon the businessmen serving that arena.
When I came across those words while reading Walter Block’s Defending the Undefendable, I was struck by the power of that under-appreciated insight (not to mention his great introduction to libertarianism opening the book).
Block’s primary illustration was the rental housing market, where “the spillover effects of bureaucratic red tape and bungling” are blamed on landlords, rather than on the government policies and procedures that caused them. And he named rent control as a primary culprit, because it “changes the usual profit incentives, which put the entrepreneur in the service of his customers,” into incentives where “the landlord can earn the greatest return not by serving his tenants well.”
Block’s conclusion applies far beyond just rent control. It describes many government interventions, not just those in the housing market. It characterizes price ceilings and price floors. It applies to taxes, particularly hidden ones. It extends to regulations that act like taxes or barriers to entry and competition. It also typifies inflation. And in each case, it is because the adverse effects of such government interventions, particularly reduced outputs and higher costs for the goods in question, set up providers to be incorrectly scapegoated as the cause.
Rent control undermines landlords’ incentives to provide the services tenants want, because it denies landlords the ability to receive adequate compensation to make those efforts worthwhile. As a consequence, landlords not only get blamed for unwillingness to do what tenants want, but also for efforts to evade the controls, such as tying apartments to the simultaneous rental of furniture, parking or other goods, even though such evasions keep the available housing supply from falling as much as it would have otherwise. Other price ceilings follow the same script.
Price floors such as minimum wage laws and “prevailing wage” requirements push prices up instead of down. The consequent higher prices and reduced wealth result from the coerced overpayment for inputs, rather than the fault of producers. But producers often end up
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