Too inexpensive to be inexpensive: How government censorship increases costs by disguising them

Abstract

Politicians often see price ceilings, subsidies and third-party payments as effective ways of reducing the amount consumers pay directly for goods and services and take credit for reducing their costs. While these policies may reduce prices, they are a form of censorship that invariably increases costs. Politically inspired interference in the communication that takes place through market prices reduces the information and discipline required to control costs. The most notable recent example of politicians trying to take credit for reducing costs with policies that increase them is found in their recommendations to reform health care. There are unfortunately a number of other examples such as price controls on apartment rents and subsidies to agriculture and education.