When I took basic economics my first year of college, we talked about the Nixon price controls, what they had done to the economy and why. I have been a free market economist ever since. And I’ve always been very wary of anyone who considered Nixon a conservative.
The Nixon price controls happened when I was old enough to be aware of them, but too young to have much understanding of the politics and economics involved. But I got a new up-close perspective on this piece of history from Dick Cheney’s memoir, In My Time. Just out of college he was an assistant to Donald Rumsfeld at the Office of Economic Opportunity. Here’s how he tells it:
The inflation rate that had hovered comfortably around 1.5 percent at the beginning of the 1960s had climbed to 5 percent. The unemployment rate had nearly doubled to 6 percent.
The Democratic majority in Congress was urging the president to use powers they had given him when they passed the Economic Stabilization Act, legislation that effectively authorized him to commandeer the economy by imposing controls on wages, prices, salaries, and rents. The Democrats voted these extraordinary powers confident that no Republican president, much less a solid free market one named Richard Nixon, would ever use them, and in the meantime, they could criticize him for not taking action. But Nixon took them up on their offer, and on Sunday night, August 15, 1971, he announced a freeze for ninety days on all wages and prices. The Cost of Living Council was created to monitor the freeze and to achieve an orderly return to the free market when the ninety-day period was over.
The freeze was simple enough. Nobody was to raise wages or prices. But the follow-on, which became known as Phase Two, would have to have rules covering all sorts of things, from permitted increases in union contracts to the price of dill pickles, for the period until market forces ruled again. The deadline for moving from the freeze to Phase Two came fast, and the two entities that were supposed to write the regulations, the Pay Board and the Price Commission, wrangled and dithered. When it looked as though they were going to miss a crucial deadline for getting regulations published in the Federal Register, Rumsfeld decided to take things in hand. He assembled Jack Grayson, the chairman of the Price Commission, and about a dozen of our CLC staff and said that we wouldn’t be leaving until we had the regulations ready for the printer. We set up in Rumsfeld’s outer office, and as others paced and dictated, I sat at one of the secretary’s desks and typed everything on an IBM Selectric typewriter. By nine the next morning, when the secretaries arrived and emptied the ashtrays and replenished the coffee, we had written the regulations that would now be governing a major share of the
economy. The degree of detail we achieved during our overnighter was truly impressive. We drew distinctions between apples and applesauce; popped and unpopped corn; raw cabbage and packed slaw; fresh oranges and glazed citrus peel; garden plants, cut flowers, and floral wreaths. We regulated seafood products “including those which have been shelled, shucked, iced, skinned, scaled, eviscerated, or decapitated.” We covered products custom-made to individual order, including leather goods, fur apparel, jewelry, and wigs and toupees…. U.S.
As assistant director for operations, I oversaw some three thousand IRS agents tasked with enforcing wage and price controls. At one point I sent a team of them to visit the major food chains, such as Safeway and Giant, and report on how they were complying with our regulations. The agents reported back that, depending on how a single regulation was applied, any one of several different prices might result, from one high enough to give the chain a significant profit to one low enough to cause a terrible loss. It was pretty clear which option the chains would pick—and who could blame them? They were dealing rationally with the arbitrary rules we were trying to impose (pp. 59-61).
In 1973 Nixon imposed another price freeze:
apparently hoping in the midst of Watergate for some political benefit. But he didn’t get it. Among other things, the freeze made raising animals for market unprofitable. A
hatchery drowned forty-three thousand baby chicks. Pigs and cows were slaughtered—and the president announced an early end to his 1973 effort to freeze prices. Texas
By this time I had grown wary of government economic control. At the start of my tenure at the Cost of Living Council, when I had been immersed in getting things going, I hadn’t had much time to think about it, but by now I realized that every day millions of people were making millions of economic decisions, and it didn’t matter how smart we were or how many regulations we wrote. There wasn’t any way we could intervene without doing more harm than good.
These thoughts confirmed my innate skepticism about what government could and couldn’t do. We could write checks, and we could collect taxes. We could run the whole military and defense side of things. But when something as big and ham-handed as the federal government tries to run something as complex and dynamic as the American economy, the result is sure to be a train wreck (p. 62).
There are some interesting insights here. The people involved—the experts—were really smart, measured by IQ and education, as far as I can ascertain. And many of them were conservative; they were the ones who mainly believed in free markets. Imagine the damage that could have been done if they had truly believed in sabotaging the free market to bring about socialism.
(On the other hand, in our time maybe we can see without having to imagine.)
Best case scenario: the experts are people who have very little idea about what I need, what I want, what I value; they can only make generalized decisions likely to displease the fewest people. No one can expect them to make exceptions for every individual, so it would be better if you changed yourself to become less exceptional. And the decisions they make, no matter how much data they may say they have, will ultimately be arbitrary. That is the one thing you can count on.
If there were an expert I’d be persuaded to trust, it might be Thomas Sowell, and fortunately he can be trusted because he knows better than to take on the job of “expert decision maker.” Here are a couple of favorite quotes on trusting the experts:
There is usually only a limited amount of damage that can be done by dull or stupid people. For creating a truly monumental disaster, you need people with high IQs.
—Thomas Sowell, Sept. 29, 2009
Whether the particular issue is housing, medical care or anything in between, the agenda of the left is to take the decision out of the hands of those directly involved and transfer that decision to third parties, who pay no price for making decisions that turn out to be counterproductive.
—Thomas Sowell, October 17, 2011