Many people are under the impression that Nixon was some sort of “conservative.” He was not. Nixon severed the last ties of the gold standard, created the EPA, and instated price controls.
“Controlling” prices by government fiat is always a bad idea. Government can’t control prices. It isn’t God. The universe just doesn’t suspend the law of supply and demand on the whim of a politician or committee. Markets are markets. Government can warp them and create pain but it can’t ultimately stop the price mechanism. Just ask the guys running Venezuela.
As oil prices continue to rise this article would be a good one for Mr. Trump to keep in his back pocket.
Even better maybe Mr. Trump should bring Professor Murphy to the White House.
In August 1971, President Richard Nixon enacted comprehensive wage-and-price controls in a misguided effort to contain inflationary pressures. (Contrary to the faulty memories of some Americans, this initial round of controls wasn’t due to the OPEC oil embargo, which didn’t occur until 1973.) Free-market economists like to use the long lines at the gas pump as a great teaching example of the problems with price controls. Yet the controls at the consumer and employee level were relaxed, and didn’t interfere with the market as much as, say, we are seeing in Venezuela today.
However, the federal government’s controls on crude oil (and natural gas) were not relaxed. In fact, as problems kept popping up with each round of interventions, the government would enact a new flurry of rules and regulations. Yet perhaps surprisingly, by the end of the decade President Jimmy Carter signed a deal to (gradually) liberalize energy markets, and President Ronald Reagan accelerated the process when he took office…
…Specifically, I will tell the story of the “reseller boom,” in which financiers in the oil market made phony trades in order to evade the spirit (and sometimes the letter!) of the price control rules. Thus, clever traders instead siphoned off the ostensible margin of profit that was supposed to go to the American public. The episode was just one of the reasons that even Congress threw in the towel and realized that price controls were a very poor instrument.*
*“Poor” is not the right word. “Counterproductive and destructive” are more apt.