4,000 Years of Price Control
[Newsweek column from March 21, 1949, and reprinted in Business Tides: The Newsweek Era of Henry Hazlitt.]
Tablets, said to be 200 years older than the Babylonian Code of Hammurabi, have just been translated which show that the ancient kingdom of Eshnunna had wage control and price control. The news ought not to have come as a surprise. For the code of Hammurabi itself (unearthed in 1902), which was promulgated earlier than 2000 B.C., fixed prices, wages, interest rates, and fees. This makes price control at least about 4,000 years old.
The real economic discovery of civilization was the free market. It was Adam Smith, in The Wealth of Nations, published in 1776, who more clearly than any other mind up to his time glimpsed the marvels of the free market. In the first flush of his discovery he compared the system of free prices and free profits and losses to “an invisible hand” that led men pursuing their own interest to promote the welfare of the whole nation more effectively than when they deliberately tried to promote it.
It was in 1776 also that Gibbon, in The Decline and Fall of the Roman Empire, wrote: “When the luxurious citizens of Antioch complained of the high price of poultry and fish . . . the emperor [Julian] ventured on a very dangerous and doubtful step, of fixing, by legal authority, the value of corn. He enacted that, in a time of scarcity, it should be sold at a price which had seldom been known in the most plentiful years. . . . The consequences might have been foreseen, and were soon felt . . . The proprietors of land or of corn withheld from the city the accustomed supply; and the small quantities that appeared in the market were secretly sold at an advanced and illegal price.”
Sixty years prior to Julian’s venture, Emperor Diocletian, in A.D. 301, had issued a famous edict fixing prices and wages. The punishment for exceeding the prices fixed was death or deportation. “The edict was well-intended but abortive,” comments the Encyclopedia Britannica. “The actual effect was disastrous.”
Let our history skip now to 1793, when the leaders of the French Revolution, in a desperate effort to offset the consequences of their own reckless overissue of paper money, passed a law imposing price ceilings. It was in some respects more reasonable than our own OPA. It allowed prices to be one-third higher than in 1790; it permitted the addition of a 5 percent profit for the wholesaler and 10 percent for the retailer. But as Andrew D. White wrote in 1876: “The first result of the Maximum [price law] was that every means was taken to evade the fixed price imposed, and the farmers brought in as little produce as they possibly could. This increased the scarcity, and the people of the large cities were put on an allowance. Tickets were issued authorizing the bearer to obtain at the official prices a certain amount of bread or sugar or soap or wood or coal to cover immediate necessities.”
But even with this early rationing system the law “could not be enforced.” Shopkeepers “could not sell such goods without ruin. The result was that very many went out of business and the remainder forced buyers to pay enormous charges under the very natural excuse that the seller risked his life in trading at all. That this excuse was valid is easily seen by the daily lists of those condemned to the guillotine, in which not infrequently figure the names of men charged with violating the Maximum [price] laws.” Within a little more than a year the law had to be repealed.
The moral of our little history is familiar. It is that “those who cannot remember the past are condemned to repeat it.” For this is what our “modern” governments do today all over the world. Ironically, it is those who now wish to return to this ancient totalitarian device who are fondest of calling themselves “progressives.” They are also fond of saying that those who believe in economic liberty “are living in the nineteenth century.” These controlists have yet to learn that they themselves are still living, as the discoveries in Babylonia attest, in the nineteenth century—B.C.!