History, Basic Economics Are Clear: Price Controls Would Destroy Health Care

Price controls destroy incentives that lead to innovation.

Price controls sound like a great way to control costs. The government will just set a ceiling on price, and nobody will be allowed to charge more than that. What could go wrong?

Everything. Always.

Many Americans are too young to remember the gasoline shortages of the 1970s. They’ve seen great swings in the price of gasoline — it jumped during the early 2000s, then plunged again after the market collapse of 2008. But there’s never been a shortage of fuel, the way there was in the 70s. In those days, the price of gas was low. But there wasn’t any to buy.

When the federal government tried to set a ceiling on the price of gasoline, it set it too low. Producers would have lost money on every sale, so they didn’t produce. That’s what always happens with price controls. The below-market price always means that the quantity supplied will be less than the quantity demanded, eventually resulting in a shortage.

The problem, as Austrian-British economist F.A. Hayek pointed out, is that no government has access to all the information that is available in a market.

That brings us to health care, one of the most regulated businesses in the…