‘The War on Prices’, a review by Dr Eamonn Butler

The Cato Institute has just published a new book that I (and others such as Deirdre McCloskey) have contributed to, The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy.

In my chapter, I point out how, from ancient Egypt to the US and UK today, government efforts to control wages and prices have never worked. Price caps, minimum wages, limits on wage increases and all the rest have not stopped inflation, nor helped the poor. but have invariably created shortages, reductions in product quality (and ‘shrinkflation’) and black markets. In the end (surprise surprise), it is the poorest people who suffer most.

The book debunks the official narrative about the recent surge in prices and the cost of living. No, it wasn’t caused by corporate greed, or wage-price spirals, price gouging, or oil prices, or Brexit, or anything else like that. It was caused by the US Federal Reserve, the European Central Bank and the appalling Bank of England keeping interest rates down too far for too long, and printing too much money.  

The authors show how minimum wage rises, which are intended to help poorer workers deal with the cost of living, simply price people out of jobs, particularly those who are young and unskilled. And even when there aren’t layoffs, minimum wage bills cause employers to cut perks, insist on less flexible work schedules, and neglect the work environment. Minimum wages are a very bad way to tackle poverty. 

There’s much more of interest in the book, including analysis of price controls in World War II, Modern Monetary Theory, water pricing, CEO pay, oil and gas price controls in the 1970s, and much else. The book has received some excellent reviews to date, from a diverse range of economists and commentators. So order your copy here!