A Lesson With Ludwig
Ludwig von Mises, Economist and Social Philosopher
Imagine walking into a grocery store, only to find empty shelves where basic necessities should be. Now, imagine that this scarcity wasn’t caused by natural disaster or a supply chain issue, but by government regulation: price controls.
The Austrian-American economist Ludwig von Mises had a lot to say about the devastating impact of government-imposed price controls. After he left Switzerland during the 1940’s and arriving to the US, he began writing a series of books that criticized government control and intervention in the economy, particularly price controls and rationing.
Mises explains that when governments impose price controls to artificially lower prices, it leads to unintended consequences — disrupting the balance between supply and demand.
As he famously said. “if the government does not want only those to buy who come first, while others go home empty-handed, it must regulate the distribution of the stocks available. It has to introduce some kind of rationing” (The Online Library of Liberty).
In essence, price controls cause shortages because producers may find it unprofitable to produce more at artificially low prices, while demand increases. This can lead to a scenario where only a select few benefit, and the rest are left with nothing, forcing governments to resort to rationing or black markets. We’ve seen this time and time again happen in socialist countries.
Mises points out that with price controls, the government imposes itself into the free market creating an imbalance in the “equilibrium” between supply and demand. This is a basic free market principle that allows for the individual to participate in the economy however they wish. But you’d know it, the government wouldn’t stop with regulating just one resource - it would force itself throughout the entire economy, causing a ricochet effect throughout all industries and resources.
The instability and lack of resources creates the perfect storm for economic decline and societal chaos. Sadly, these are just two consequences of socialist policies. Just like the United States tried in the 1940’s, governments around the world are trying to enforce price control on basic resources like rent, energy and food.
History tells us that free market principles are important to ensure resources are distributed efficiently and available for all.
Now, here’s the thing! We truly believe we can help heal the Republic by tending to the home. The future of America relies on you having intentional conversations with your kids in order to instill a deeper sense of understanding and conviction in the hearts and minds of this rising generation. You are your child’s best teacher.
Here are five simple ways to start a conversation about the many benefits of a free market:
Explain the basics of Supply and Demand! If you need a refresher, we go in-depth about this in our curriculum, “Intro to Socialism”, you can download it here!
Throw out the scenario mentioned above about arriving in the grocery store to see empty shelves — but not because of a natural disaster or supply chain issues — because of government regulation! What do they think?
Discuss the thoughts of economist Ludwig von Mises: was he right?
Ask them if they think it’s true fairness for the government to control prices. What about the people who don’t get the product because it sells out so fast, and there isn’t enough production because the producers aren’t making a profit? What will happen according to Supply and Demand? What will happen, according to Ludwig von Mises?
Walk them through why government regulation creates instability and throws off the “equilibrium” of Supply and Demand, and allow them to come to their own conclusion about why free market principles are important to ensure resources are distributed efficiently and available for all.
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