Some overlooked costs of price controls

Extract from “Flaws & Ceilings”

In addition to the direct and observable effects of price controls

– shortages and surpluses – there is also a series of subsequent,

indirect costs which emerge. Perhaps the best source for understanding

these overlooked costs is to look to those who were

directly involved in designing and implementing past controls.

One such individual, G. Jackson Grayson Jr, served as the

chairman of the Price Commission in the United States under

President Nixon from 1971 to 1973. In this role Grayson was responsible

for overseeing the implementation and enforcement

of Nixon’s price controls. After leaving his post, Grayson (1974)

wrote: ‘[a]s a result of my sixteen months as price controller, I

can list seven ways that controls interfere (negatively) with the

market system and hasten its metamorphosis into a centralized

economy’ (page 10). Grayson’s list can be paraphrased and

summarised as follows…