Supply Under Rent Control

Rent control has effects on supply as well as on demand. Nine years after the end of World War II, not a single new building had been built in Melbourne, Australia, because of rent control laws there which made buildings unprofitable. Declines in building construction have likewise followed in the wake of rent control laws elsewhere. After rent control was instituted in Santa Monica, California in 1979, building permits declined to less than one-tenth of what they were just five years earlier....

Law And Order

Where government restricts its economic role to that of an enforcer of laws and contracts, some people say that such a policy amounts to doing nothing. However, what is called nothing has often taken centuries to achieve-namely, a reliable framework of laws, within which economic activity can flourish, and without which even vast riches in natural resources may go unused and the people remain much poorer than they need to be. Like the role of prices, the role of a reliable framework of laws may...

Antitrust Laws

With anti-trust laws, as with regulatory commissions, a sharp distinction must be made between their original rationales and what they actually do. The basic rationale for anti-trust laws is to prevent monopoly and other conditions which allow prices to rise above where they would be in a free and competitive marketplace. In practice, most of the great anti-trust cases in the United States have involved some business that charged lower prices than its competitors. Often it has been complaints...

Specialization And Distribution

A business firm is limited, not only in its over-all size, but also in the range of functions that it can perform efficiently. General Motors makes millions of automobiles, but not a single tire. Instead, it buys its tires from Goodyear, Michelin and other tire manufacturers, who can produce this part of the car more efficiently than General Motors can. Nor do automobile manufacturers own their own automobile dealerships across the country. Typically, automobile producers sell cars to local...

Unemployment

Because the government does not hire surplus labor the way it buys surplus agricultural output, a labor surplus takes the form of unemployment, which tends to be higher under minimum wage laws than in a free market. Because people differ in many ways, those who are unemployed are not likely to be a random sample of the labor force. In country after country around the world, those whose employment prospects are reduced most by minimum wage laws are those who are younger, less experienced, and...