Price Controls Are Popular Again

Price controls have traditionally been a policy that economists love to use as an example of unintended consequences, but new survey data suggests voters across the political spectrum increasingly support them. We dig into why both Republicans and Democrats are warming to the idea after years of frustration with higher prices. We also walk through what economic theory and history tell us about shortages, production incentives, and the longer-run effects of price ceilings. Finally, we wrestle with a harder question for economics teachers: if students understand the model but still support the policy, what exactly should we be trying to teach?In this episode, we talk about:* Why support for price controls now crosses party lines* How years of higher grocery, housing, and energy prices may be creating “inflation fatigue”* Why price ceilings can create shortages and change producers’ behavior over time* Why understanding the economics of price controls doesn’t necessarily mean opposing them* What economics teachers can do when students understand the model but reach a different policy conclusionIf you liked this conversation, you might also enjoyThis Week’s Drinks 🍻Jadrian typically joins with a beer, but this time he’s gone with a Cuba Libre Zero. He’s finally taking advantage of the bar cart he was inspired to assemble by friend-of-the-show Brian O’Rourke. Matt went with a Trash Talk IPA from Yards Brewing, served in some appropriately celebratory business-school glassware.Name That Stat 📊In what may be a first for the show, we somehow both managed to get our stats this week! Matt shared the stat that drove our episode: the share of Republicans who now say they support government price controls. Jadrian went with a back-to-school theme and shared the percentage of college students who say they have changed their major or concentration because of job market worries.Show NotesPrice controls are one of those topics that can feel almost automatic in an introductory economics class. Draw supply and demand, put a binding price ceiling below equilibrium, show the shortage, and move on to price floors. New polling data might make this topic a lot more interesting. A CBS News/YouGov poll found a majority support for price controls among Republicans, independents, and Democrats. That caught our attention because the partisan differences are still there, but opposition to price controls is no longer something you can neatly map onto the usual limited-government versus government-intervention divide.So what changed? Our best guess was fatigue. Consumers have spent years watching grocery bills, housing costs, gasoline, and plenty of everyday purchases get more expensive. Even when inflation slows, that doesn’t mean the price level goes back to where it was before. We talked about the disconnect that creates when economists can say inflation has come down, but consumers continue to see their grocery bill is still much higher than it used to be. After enough years of that, “the government should do something about prices” starts sounding pretty appealing.From there, we went back to the basic economics of a price ceiling. If the government caps a price below the market equilibrium, consumers want to buy more while producers have less incentive to supply the product. In the short run, that creates a shortage. But the longer-run response may be even more important. Farmers plant less next year. Landlords invest less in maintaining apartments. Developers decide not to build. These aren’t just predictions. The U.S. has a history of wage and price controls in the 1970s and rent control in modern days. That brought us to the part of the conversation we found most interesting: what if people understand all of that and still support the policy? Jadrian admits to seeing this in his class. Students can pred