Price Controls Have Failed for 4,000 Years—and Humans Still Haven’t Learned

[ClaytonB]

Price Controls Have Failed for 4,000 Years—and Humans Still Haven’t Learned

FEE: Price Controls Have Failed for 4,000 Years—and Humans Still Haven’t Learned

Monday, September 12, 2022
by Jon Miltimore

The people of ancient Eshnunna can be forgiven for not understanding why price controls are harmful. Today’s policymakers, who have the benefit of history and economics, have no excuse.

In 1892 the French archaeologist Henri Pognon made a historic discovery a few dozen miles northeast of Baghdad: a massive tell that held the ruins of the ancient city-state Eshnunna.

Though it was not excavated until decades later by another archaeological team led by Dutch Egyptologist Henri Frankfort, the tell was one of the great finds of the century, revealing secrets of a Mesopotamian city that had been hidden for millennia.

Among the secrets discovered on cuneiform tablets was that Eshnunna used price controls, a discovery notable in that it appears to be the oldest historical record of humans fixing prices. (I’ve attempted to verify this fact with economic historians, and will let you know if I get a response.)

1 kor of barley [she’um] is (priced) at [ana] 1 shekel of silver;

3 qa of “best oil” are (priced) at 1 shekel of silver;

1 seah (and) 2 qa of sesame oil are (priced) at 1 shekel of silver. . . . The hire for a wagon together with its oxen and its driveris 1 massiktum (and) 4 seah of barley. If it is (paid in) silver, the hire is one third of a shekel. He shall drive it the whole day.

Eshnunna’s price controls edge out by a couple centuries the Code of Hammurabi (1755–1750 BC), a more famous record from ancient Babylon that was a “maze of price control regulations,” as the historian Thomas DiLorenzo put it.

This might explain why the First Babylonian Empire fizzled nearly a thousand years before the Greek poet Homer told the story of the Trojan War. Price controls don’t work, and an abundance of history (as well as basic economics) proves it.

...

Source: FEE: Price Controls Have Failed for 4,000 Years—and Humans Still Haven’t Learned

 

[Pauls' Revere]

You must spread some Reputation around before giving it to ClaytonB again.

 

[Snowball]

Historically speaking, this opinion is ridiculous.

The majority did not even deal in money until the Industrial Revolution. Goods were bartered and paid as if they were money.
There was nothing like we have today, that is driving artificial prices and inflation, debasement of the currency, automated grift, etc.

 

[ClaytonB]

Historically speaking, this opinion is ridiculous.

Truer words were never spoken...

The majority did not even deal in money until the Industrial Revolution. Goods were bartered and paid as if they were money.

Um, no.

Coins have been in use for at least 3,000 years, and other forms of money were in use even earlier.

There was nothing like we have today, that is driving artificial prices and inflation, debasement of the currency, automated grift, etc.

Coins have been being debased from the earliest times, first by private minters and scammers, later by chieftains and monarchs. It's one of the oldest and most popular scams in all of history.

 

[Invisible Man]

Historically speaking, this opinion is ridiculous.

The majority did not even deal in money until the Industrial Revolution. Goods were bartered and paid as if they were money.
There was nothing like we have today, that is driving artificial prices and inflation, debasement of the currency, automated grift, etc.

Are you denying that precious metals were used as money for millennia before the Industrial Revolution?

What do you think that the Code of Hammurabi is fake news or something?

 

[Invisible Man]

Truer words were never spoken...



Um, no.

Coins have been in use for at least 3,000 years, and other forms of money were in use even earlier.



Coins have been being debased from the earliest times, first by private minters and scammers, later by chieftains and monarchs. It's one of the oldest and most popular scams in all of history.

It doesn't matter if coins were used though. The article in the OP isn't about the use of coins. It's about the use of price controls. It cites ancient documents that appear to refer to specific price controls regarding prices denominated in shekels of silver, which were not coins but units of weight.

Granted, I don't think the article really proves that the quoted lines refer to price controls. To prove that would require delving into the details on a level that would make the article uninteresting to most readers.

But the lines at least *could* be talking about price controls. And the fact that silver measured in units of weight, as opposed to minted coins, was the medium of exchange doesn't in itself disprove that the text in question bears evidence of some ancient ruler attempting to legislate price controls.

 

[oyarde]

The actual find sounds more like a market price menu than price control

 

[ClaytonB]

It doesn't matter if coins were used though. The article in the OP isn't about the use of coins.

You lost track of the sub-plot. I posted an article about price-controls. Snowball, as usual, posted some completely off-topic thoughts about how money was supposedly never used before the 1800's. Despite being OT, I refuted that nonsense as a courtesy to anyone who might be unfamiliar with the history of money.

It's about the use of price controls. It cites ancient documents that appear to refer to specific price controls regarding prices denominated in shekels of silver, which were not coins but units of weight.

Thank you for that recapitulation.

Granted, I don't think the article really proves that the quoted lines refer to price controls. To prove that would require delving into the details on a level that would make the article uninteresting to most readers.

But the lines at least *could* be talking about price controls. And the fact that silver measured in units of weight, as opposed to minted coins, was the medium of exchange doesn't in itself disprove that the text in question bears evidence of some ancient ruler attempting to legislate price controls.

OK? The Code of Hammurabi definitely has price-controls and is nearly as old as the find mentioned in this article. Whether these were definitely price-controls is a question for the archaeologists, but there is no reason to believe that people were highly educated economists 4,000 years ago. The general tendency in all centralized political systems throughout human history has been towards price-controls and other forms of socialism.

 

[Snowball]

Just because coins were minted doesn't mean they were used as widely or owned as ubiquitously as money is used in the modern age.

Even most Americans before the Civil War had very little money in daily use.

If you want to seriously consider price controls, consider that it was rather the refusal to employ price controls or monetary controls that lead to instability and revolution, class warfare and the transfer of goods and wealths to the new elites which argued for "free markets".

The French Revolution era is a great example of how introduction of "free markets" directed by capitalists caused great famine, unrest and suffering.(1)

There have been times, though, when price controls that were unfair and predatory were used by the city bankers to try and buy up the peasants lands, crop yields and disputed, stolen Church properties that they attempted to buy with their rapidly deprecating paper money (again, set by "free markets").(2)

Lefebvre, Georges, The Coming of the French Revoution, Princeton, 1947 (see index for freedom of trade, etc.)

Cobban, Alfred, The Social Interpretation of the French Revolution, Cambridge, 1962, pp.96-105

You also must realise that free markets worked hand-in-hand with the paper money schemes, against gold and against true, natural values. If you'd like to read about that as it transpired in England, readPaper Against Gold, by William Cobbett. For a broader historical review, try Barren Metal by E. Michael Jones.

I suggest you read history books by actual historians, not revisionist polemics by free market apologists. Also, understand that this attempt to link sound money with free markets is entirely 100% a new construct, because they used to be consistent enemies. The change occurred because the gold was transferred to the new elites, so now, they love it. Because they stole it.

 

[ClaytonB]

Just because coins were minted doesn't mean they were used as widely or owned as ubiquitously as money is used in the modern age.

First of all, yes it does. The reason is that the use of money never originated with coins. Second, the "ubiquity" of money-use is beside the point -- your claim was that people generally didn't use money before the Industrial Revolution and that is laughably false and absurd. Feel free to live with your "alternative facts", as you wish, but the rest of us out here in reality will continue with the historical facts.

Even most Americans before the Civil War had very little money in daily use.

If you mean they were very poor, yes, the average American pre-1865 would be very poor by modern standards. If you mean they had little or no cash savings ("cash" here just meaning "any hand-to-hand currency/coin accepted in exchange as 'money'"), OK, sure, that's part of the definition of poverty (low or non-existent liquid savings). But the original assertion was that most people before the Industrial Revolution didn't "use" money which is patently false. In order for your statement to be true, most people would have had to trade using barter, which is absurd. People who were very poor may have made very few elective transactions (due to having little, if anything, to trade), but whatever transactions they did conduct would have used... money.

If you want to seriously consider price controls, consider that it was rather the refusal to employ price controls or monetary controls that lead to instability and revolution, class warfare and the transfer of goods and wealths to the new elites which argued for "free markets".

No thanks. I'll pass on indulging brute idiocy.

The French Revolution era is a great example of how introduction of "free markets" directed by capitalists caused great famine, unrest and suffering.(1)

Um, no.

There have been times, though, when price controls that were unfair and predatory were used by the city bankers to try and buy up the peasants lands, crop yields and disputed, stolen Church properties that they attempted to buy with their rapidly deprecating paper money (again, set by "free markets").(2)

Lefebvre, Georges, The Coming of the French Revoution, Princeton, 1947 (see index for freedom of trade, etc.)

Cobban, Alfred, The Social Interpretation of the French Revolution, Cambridge, 1962, pp.96-105

It's interesting how you are apparently capable of reading and comprehending things in books, but not in discussion threads. What an amazing capacity.

You also must realise that free markets worked hand-in-hand with the paper money schemes, against gold and against true, natural values.

The term "free market" itself has become just another political fnord nowadays. When I have this kind of discussion, I insist in breaking down "free market" into its constituent components:

- Homesteading principle (rule of first use)
- Free exchange (anyone may trade with anyone else, at any price they both freely agree to)

If you want to have a "free market" debate, then let's get in the ring and let's do a few rounds. Please explain to me why the second-claimant of a natural resource should have higher claim to that resource than the first user. Please explain to me how one party to an exchange could be harmed in the course of that exchange, when both parties have the full legal right to withdraw at any point for any reason.

If you'd like to read about that as it transpired in England, readPaper Against Gold, by William Cobbett. For a broader historical review, try Barren Metal by E. Michael Jones.

I suggest you read history books by actual historians, not revisionist polemics by free market apologists.

And who are these "free market apologists" that you think I'm reading?

Also, understand that this attempt to link sound money with free markets is entirely 100% a new construct, because they used to be consistent enemies. The change occurred because the gold was transferred to the new elites, so now, they love it. Because they stole it.

Well, you're saying the quiet part out loud, but that doesn't make it any less bonkers. The gold-owning elites hate popular gold ownership, have always hated popular gold ownership and will always hate popular gold ownership. The reason they hate popular gold ownership is that they have learned, through long experience, that gold checks the power of the Crown to redefine economic reality as it sees fit. The King can ban whatever goods he pleases, but markets are markets, and people will rarely turn down an opportunity to make a profit, and banned goods are made vastly more profitable by virtue of being banned! That's the "free" in "free market" that the clown-"elites" hate. They have always hated it, and will always hate it, because they are clinically insane and do not acknowledge the existence/reality of anything that constrains them. They have never hated gold itself... they call it a "barbarous relic" in one breath, then literally clothe themselves in it, ride in cars wrapped in it, bathe in tubs plated in it, and so on. The clown-"elites" love gold with the undying affection of a dragon. They just only love it in their hands, not yours and mine.

 

[Snowball]

Clayton, your last paragraph only helps to embellish my point further, vis-a-vis gold. Btw, you also must admit that sound money and governmental price setting of gold and silver is a tried and true conservative principle. One that this country abandoned to serve its international overlords.

Now, let's go with this ... you wrote...

If you want to have a "free market" debate, then let's get in the ring and let's do a few rounds. Please explain to me why the second-claimant of a natural resource should have higher claim to that resource than the first user. Please explain to me how one party to an exchange could be harmed in the course of that exchange, when both parties have the full legal right to withdraw at any point for any reason.

hmm. "the second-claimant of a natural resource" - this could suggest many different parties, as could "first user".
What example are you thinking of?

 

[acptulsa]

You also must realise that free markets worked hand-in-hand with the paper money schemes, against gold and against true, natural values.
.

Interesting that you keep using quotation marks around the phrase free markets until here. An actual free market is constrained only by supply and demand. This evaluation of supply and demand gets applied to both the commodity and to the money or currency. So, it matters not one whit which is used. That's, like, the very definition of free market. That's, like, the very definition of market, and the very definition of free.

Any market that goes against "natural values" isn't free. Someone may be misdefining it as a "free market", but that's clearly fake news.

 

[Snowball]

Interesting that you keep using quotation marks around the phrase free markets until here. An actual free market is constrained only by supply and demand. This evaluation of supply and demand gets applied to both the commodity and to the money or currency. So, it matters not one whit which is used. That's, like, the very definition of free market. That's, like, the very definition of market, and the very definition of free.

Any market that goes against "natural values" isn't free. Someone may be misdefining it as a "free market", but that's clearly fake news.

Yes. You understood my point well.

 

[acptulsa]

Yes. You understood my point well.

Okay. But somehow I managed to completely miss that it was your point.

 

[ClaytonB]

Clayton, your last paragraph only helps to embellish my point further, vis-a-vis gold.

This is vacuous verbiage to create the impression that you are "responding" when you have nothing of substance to say.

Btw, you also must admit that sound money and governmental price setting of gold and silver is a tried and true conservative principle.

Maybe it is, I don't know, but I'm not that kind of conservative.

One that this country abandoned to serve its international overlords.

Bimetallic price-fixing has always been a scheme by the "elites" to rip off the public, always at enormously destructive cost to the economy. If gold and silver have a natural ratio, the market will discover it just fine without interference from the pen-wielding Mad Hatters in parliament/Congress. So no, price-setting of gold/silver has never helped anything, it can only destroy.

hmm. "the second-claimant of a natural resource" - this could suggest many different parties, as could "first user".
What example are you thinking of?

Alice and Bob (acquaintances but not partners) move into an unexplored territory. There are no natives. No one is using the land. No government has been established over the territory, so there is no office of land registry. Alice begins to put up fences and use water from a nearby stream for her house and to water the flock of small livestock she brought with her. Bob later comes by and objects -- "We are a communal collective, this land and water belongs to everyone, you have no right to fence off part of it for your exclusive use. I am hereby claiming 50% share in your livestock, etc."

Alice has not harmed Bob by using a creek he was not using. She has not harmed Bob by fencing and using the land he was not using. So what legal claim does Bob have on the resources that Alice has homesteaded (put to first-use)?

 

[ClaytonB]

Interesting that you keep using quotation marks around the phrase free markets until here. An actual free market is constrained only by supply and demand. This evaluation of supply and demand gets applied to both the commodity and to the money or currency. So, it matters not one whit which is used. That's, like, the very definition of free market. That's, like, the very definition of market, and the very definition of free.

Any market that goes against "natural values" isn't free. Someone may be misdefining it as a "free market", but that's clearly fake news.

Another way to say it, perhaps clearer, is this: Any two individuals who are voluntarily exchanging are benefiting from that exchange.

This is true by definition (praxeology). If you can show that they are somehow not benefiting, then whatever you are talking about is not voluntary exchange, it is something else.

 

[ClaytonB]

Just because coins were minted doesn't mean they were used as widely or owned as ubiquitously as money is used in the modern age.

To drive the point home, here is the opening of a parable of Jesus that is roughly 2,000 years old: "For the kingdom of heaven is like a landowner who went out early in the morning to hire workers for his vineyard. He agreed to pay them a denarius for the day and sent them into his vineyard..." (Matthew 20:1,2)

Kind of strange that Jesus is having grunt laborers paid with coins that, according to you, were the exclusive currency of the plutocrat class any time prior to circa 1800. Just seems weird and random for Jesus to have a parable where the McDonald's employee is getting paid in Ferraris....

 

[acptulsa]

Maybe it is, I don't know, but I'm not that kind of conservative.

See, that's how they're brainwashing them these days. Zippy used to go around reinforcing the hell out of this tactic. I'm pretty sure that even admitting it's possible to define a unit of money as x amount of y% pure metal z is grounds to be denied a teaching certificate.

Invariably that exact same process of defining the unit of sound money is characterized as "fixing the price" of metal z "at" one unit for x amount. They seem to be trying to make kids think that these monetary units, or even governments themselves, predate the natural elements of the earth.

You know how it goes. In the Beginning was the Void. And The Government Looked upon the Void, and said, Let There Be Darkness. And the people were Sunburned, and hadn't Slept in Six Days, and they said, Thank You Lord Government for The Darkness.

And the Government proclaimed the Seventh Day a Day of Darkness and Rest, and the Ministry of Truth named the day of Darkness Sunday.

 

[Snowball]

Bimetallic price-fixing has always been a scheme by the "elites" to rip off the public, always at enormously destructive cost to the economy. If gold and silver have a natural ratio, the market will discover it just fine without interference from the pen-wielding Mad Hatters in parliament/Congress. So no, price-setting of gold/silver has never helped anything, it can only destroy.

forget it, Clayton. I don't have time for this. Anyway -- re-read what you wrote and look at this closely.
I'll give you a hint. It actually says FIVE DOLLARS on it. Capisci?

 

[ClaytonB]

Invariably that exact same process of defining the unit of sound money is characterized as "fixing the price" of metal z "at" one unit for x amount. They seem to be trying to make kids think that these monetary units, or even governments themselves, predate the natural elements of the earth.

You know how it goes. In the Beginning was the Void. And The Government Looked upon the Void, and said, Let There Be Darkness. And the people were Sunburned, and hadn't Slept in Six Days, and they said, Thank You Lord Government for The Darkness.

And the Government proclaimed the Seventh Day a Day of Darkness and Rest, and the Ministry of Truth named the day of Darkness Sunday.

Yep, that's pretty much it

Price-fixing involves at least two goods. Money is also a good, regardless of its form (coin, paper, fiat, etc.) If Charles III proclaims, "Henceforth, two apples shall be exchanged for one orange", that is price-fixing. But that would be kind of silly because it's so inconsequential. Assuming it was enforced to the hilt, what would really happen is that whichever good is on the disadvantaged side of the fixed-price (its exchange-rate versus market value set too low) would basically disappear from the market. That is what happened whenever you had fixed bimetallic exchange -- either gold or silver would be undervalued by its legal exchange rate and the idiotic country with such a fixed exchange would experience metal-flight.

Modern national currencies are abstract units of exchange, meaning, they don't correlate to anything but themselves. When you issue pure-gold or pure-silver coins in that denomination, you get a mass scramble of arbitrage in the coinage market as new money is issued under that artificial denomination. The only solution is to denominate the coins by massively undervaluing the melt-value of the commodity metal, and that's what we have to do today. $1,800 of melt-value gold goes into a $20 US gold coin. $28 melt-value of silver goes into a $1 US silver coin. That ensures that nobody will try to directly exchange either of these metals against the other under their legal ratio. In dollars, gold is "fixed" to 20:1 ratio against silver, but it doesn't matter because the legal value is so far away from the melt-value that nobody can use it to advantage, so you don't experience metal-flight.

There are many problems with price-fixing but probably the most obvious is that prices fluctuate constantly. Once you fix a legal price, the market-price is guaranteed to be higher or lower than that fixed legal price on any given day. This creates a problem where market participants can demand liquidation of contracts denominated in the good with fixed-price. "Oranges are legally $3 each. Deliver the contract today or I'm suing!" ... after the market price of oranges rises from $2.50 to $3.50. In order to make the delivery happen on time, the poor guy holding the contract has to go out to the open market to buy oranges for $3.50 that he will only be paid $3 for, a guaranteed loss. For this reason, nobody explicitly makes such contracts, but this is the underlying flaw in all manifestations of price-fixing, whether that be rent-control or other forms of price controls.