Price controls cause chaos

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The 1970s were a strange time, to say the least.Chicken farmers gassed, drowned, and suffocated roughly a million baby chicks. “It’s cheaper to drown ‘em than to put ‘em down and raise ‘em,” one Texas farmer explained. Dairy farmers slaughtered cows. Hog farmers culled breeding stock. Why did any of this happen? Good ol’ price controls.This isn’t another “price controls are bad” post. Well, they are. But I have a new paper with Alex Tabarrok and Mark Whitmeyer that has genuinely new stuff: a theorem explaining why price controls produce exactly this kind of “chaos,” as we call it, and a new way to measure the costs that doesn’t require assuming a demand curve.Instead of chickens, most people probaly think about the gasoline lines for 1970s price controls. I’ve written before about the 1970s gas crisis, about odd-even rationing, about violence at filling stations, about the lines disappearing overnight when controls were lifted. Lines stretched miles in Maryland and Connecticut. Over 90 percent of stations in Connecticut and Massachusetts were rationing fuel. Some had run out entirely. But what gets less attention is the other side: in Idaho, Montana, Utah, and Wyoming, not a single surveyed station reported any problem, according to AAA survey data presented to President Ford during the crisis. Zero. Texas, the Deep South, and the Great Plains were, as Time magazine put it, “virtually awash with gasoline.”Why would a 9 percent national gasoline shortfall produce over 90 percent of stations rationing in Connecticut and zero problems in Idaho? The answers point to the same me…