excerpts from ECONOMICS IN ONE LESSON  by Henry Hazlitt

Chapter XVII, "Government Price-Fixing"

     ...now we cannot hold the price of any commodity below its market level without in time bringing about two consequences. 

     The first is to increase the demand for that commodity.  Because the commodity is cheaper, people are both tempted to buy, and can afford to buy, more of it. 

     The second consequence is to reduce the supply of that commodity.  Because people buy more, the accumulated supply is more quickly taken from the shelves of merchants.  But in addition to this, production of that commodity is discouraged.  Profit margins are reduced or wiped out.  The marginal producers are driven out of business.  Even the most efficient producers may be called upon to turn out their product at a loss.  This happened in World War II when slaughter houses were required by the Office of Price Administration to slaughter and process meat for less than the cost to them of cattle on the hoof and the labor of slaughter and processing. 

     If we did nothing else, therefore, the consequence of fixing a maximum price for a particular comodity would be to bring about a shortage of that commodity. ...

-- excerpted from Chapter XVII of Economics in One Lesson by Henry Hazlitt.  

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"The whole of economics can be reduced to a single lesson, and that lesson can be 
reduced to a single sentence. The art of economics consists in looking not merely 
at the immediate but the longer effects of any act or policy; it consists in tracing 
the consequences of that policy not merely for one group but for all groups."

"Economics is haunted by more fallacies than any other science known to man."
-- Henry Hazlitt in Economics in One Lesson

Economics in One Lesson was voted among the top 10 non-fiction books of the 20th
Century in the Modern Library readers' poll. The final results were posted here.

Chapter II, "The Broken Window" is available on the web HERE.

"Price-rent-wage controls may benefit some individuals and groups, but not society as a
whole; ultimately, they create shortages, black markets, and a deterioration of quality and 
services. There is no such thing as a free lunch." -- Mark Skousen in Economics in One Page


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