Whoah! Reading this book was like downloading and running the latest update to my (economic policy) bullshit detector, along with a few missing patches…

The War on Prices is a compelling collection of essays from several prominent economists, expertly curated by Ryan Bourne of the Cato Institute—a renowned public policy think tank. Broken down into three parts, the essays serve as both a continuation and material expansion of [b:Forty Centuries Of Wage And Price Controls|45279371|Forty Centuries Of Wage And Price Controls How Not To Fight Inflation|Robert L. Scguettinger|https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/books/1556043416l/45279371._SY75_.jpg|69990449]. They shed light on contemporary issues surrounding price controls, inflation, and common misconceptions about how prices are set in a free market, what they tell us, and why we should very much care. In short, the authors argue that a lack of understanding of the monetary and fiscal mechanisms at play leads to the misallocation of indignation and misplaced responsibility for inflation, ultimately resulting in flawed government policies.

Price changes are regularly seen not as an outcome of a market process by movements in supply and demand, but as if they’ve been decreed or determined by some malevolent actor. That view leads to their disdain. People see large discrepancies between the market price and what they think the good should be valued at, or what they are willing to pay for it, and conclude that market prices must be wrong. That conclusion then encourages the use of price controls and other business regulations. But it’s important to realize that the popular rejection of market prices does not stem just from the distributional consequences of market outcomes, but also from a misunderstanding of how to think about prices, compared with the very different concept of value.

The authors spare no words and freely drop famous names along the way, making it clear they are not about to hold anything back. Let me be honest here, if you’re a fan of Democratic Socialism and its firebrands—think Bernie Sanders, Alexandria Ocasio-Cortez, Elizabeth Warren—you might find some chapters challenging. Rest assured though, it never devolves into a compendium of grievances. However, if you’re on the fence about their proposals or have doubts about their viability, this book might as well be the poison-pill you need.

Subjective value theory thus turns the labor theory on its head. The value of outputs isn’t determined by the value of labor inputs (from which, if you’re a Marxist or Alexandria Ocasio-Cortez (AOC), capitalists then “steal” profits). No. The value of inputs like labor, or land, or capital is determined by the value that their outputs could have in terms of usefulness in the future to others, at the margin. Not in total, and not in the past. Such prices arise naturally from human interaction. People facing them will make the correct decisions about what to do next.

Part 1 delves into Inflation through the lens of the "Quantity Theory of Money," encapsulated by the equation MV = PQ. This theory not only explains the relationship between money, economic activity, and price levels but also provides a robust framework to dissect and evaluate the myriad arguments surrounding post-pandemic inflation. The authors convincingly demonstrate that while the supply shocks from the pandemic-induced shutdowns initially triggered shortages, it was the excessive emission of money through benefits, stimulus packages, and the subsequent excess spending that fueled the prolonged and intensified inflation we now see. Populist narratives blaming greed, opportunism, or increased government intervention fall short in explaining the true drivers of inflation.

Confusing inflation and relative prices can have dire consequences, not only for understanding the economy, but for public policy as well. Diverting resources from one industry to another (as was done by the misleadingly named Inflation Reduction Act and other industrial policy interventions) will artificially modify relative prices, but cannot reduce inflation. Inflation can only be controlled by drying up its source, which lies in the Federal Reserve’s monetary policy. Relative prices, on the other hand, must be free to adjust to movements of supply and demand. Therefore, there is much at stake in clearing up this mistaken conflation.

Part 2 tackles Prices and Price Controls, presenting some of the most robust research and arguments against these mechanisms for societal change and prosperity. Building on the foundations laid in [b:Forty Centuries Of Wage And Price Controls|45279371|Forty Centuries Of Wage And Price Controls How Not To Fight Inflation|Robert L. Scguettinger|https://i.gr-assets.com/images/S/compressed.photo.goodreads.com/books/1556043416l/45279371._SY75_.jpg|69990449], this section covers a range of contemporary issues, including interest rate caps, healthcare pricing, minimum wage laws, anti-price gouging regulations, and zero-price controls for kidneys and plasma.

The authors meticulously argue that price controls distort the natural balance of supply and demand, leading to inefficiencies and unintended consequences. Whether it's interest rate caps reducing access to credit for the riskiest borrowers or minimum wage laws inadvertently increasing unemployment among low-skilled workers, the essays highlight how these interventions often do more harm than good. By restricting prices, the government not only misallocates resources but also stifles innovation and economic growth.

Part 3 explores Value, taking a critical look at deeply entrenched concepts such as the labor theory of value, gender pay inequality, dynamic pricing, and the infamous pink tax. Here, the authors dismantle the notion that prices reflect inherent societal values or judgments, instead emphasizing that prices are the result of individual, subjective valuations based on supply and demand dynamics.

The price system doesn’t guarantee nirvana, heaven, perfection. But beware of making the imagined perfect the enemy of the actual pretty good. Money prices don’t value us ethically. But they have yielded a 3,000 percent increase in human material welfare since 1800. Not too shabby. Let’s keep it going.

The chapter on the pink tax, for example, debunks the myth that products marketed to women are inherently overpriced due to gender bias. Instead, it attributes price differences to legitimate factors like varying product attributes, higher production costs, and specific consumer preferences. Similarly, discussions on gender pay gaps challenge the simplistic attribution of wage disparities to societal biases, presenting evidence that highlights the complexity of wage setting and the limitations of attributing pay differences solely to gender.

I'm not being too generous when I say that we are living in "interesting times." From Canada to Argentina, we're witnessing radical shifts in the rhetoric, direction, and intensity with which the ruling class is seeking to address society's challenges. Immigration, tariffs, annexations, austerity measures—nothing is off the table. Which is why destructive macroeconomic forces such as inflation become especially pernicious when they are exploited to impose nonsensical policies that ultimately disenfranchise the very people they intend to benefit. Thus, I wholeheartedly believe that, in addition to being a masterful compilation that challenges prevailing economic misconceptions and equips readers with a deeper understanding of how market mechanisms truly operate, books like The War on Prices are crucial tools for transforming citizens into better-informed voters, activists, and stewards of their future.

This book is an essential read for anyone looking to cut through the noise of economic dogma and grasp the fundamental truths that drive our economy. If you’re ready to have your economic beliefs tested and refined, and to arm yourself with the knowledge to advocate for more effective and rational policies, this book is the update your economic policy toolkit desperately needs.

Highest possible recommendation.