Wage-Price Controls Under Nixon

[Alex Tabarrok]

Michael Kinsley has an interesting piece in Slate today.

http://slate.msn.com/id/2084315/

It's about the Patriot Act and other so-called security measures and 
whether they infringe on our liberties. He concludes that so-far the 
infringement has not been so bad but there is potential danger in large 
part because Americans don't really love freedom. Indeed, when motivated 
with good stories they are willing to give freedom away quite easily 
(shades of Bryan's notion of rationality irrationality here). He then 
gives this stunning example:



This does not mean there's nothing to worry about. Incipience is 
legitimately scary. To return to the original question, Americans are 
not so innately freedom-loving that we would never let it dribble away 
without noticing. I can prove this because it actually happened, within 
the adult lifetimes of anyone over about 50. On August 15, 1971, more or 
less out of the blue, President Nixon declared a freeze on wages and 
prices. Legislation authorizing this had passed Congress the year 
before, with little controversy. The freeze evolved into a system of 
formulas about who could get paid what, requirements about filing forms 
with the government and keeping records and posting notices, all 
enforced by a growing bureaucracy of wage and price cops. The controls 
lasted a couple of years at full strength and then faded away over the 
next couple.

The notion that the government could tell everyone from General Motors 
to a baby-sitting teenager what they could charge—and did so—seems 
shocking in retrospect, at least to me. There was no real national 
emergency. It was part of a cynical re-election strategy to gun the 
economy while holding inflation temporarily in check. But at the time, 
controls were not just accepted but popular. When they disappeared, even 
those (like me) who had opposed them found it strange and, at first, 
unnatural. You mean, anyone can just charge whatever they want? How does 
that work? The analogy isn't perfect. The right to set your own price 
isn't as profound as the right to express your own political opinion. 
But it is, if anything, even more a part of every citizen's daily life. 
And yet when they took it away, we freedom-loving Americans didn't even 
miss it.

--
Alexander Tabarrok 
Department of Economics, MSN 1D3 
George Mason University 
Fairfax, VA, 22030 
Tel. 703-993-2314

Web Page: http://mason.gmu.edu/~atabarro/ 

and 

Director of Research 
The Independent Institute 
100 Swan Way 
Oakland, CA, 94621 
Tel. 510-632-1366