All-Around Price Controls Destroy the Connection between the Production Structure and the Structure of Demand

The imposition of all-around price controls means that the system of production has become completely independent of the preferences of consumers for whose satisfaction production is actually undertaken. The producers can produce anything and the consumers have no choice but to buy it, whatever it is. Accordingly, any change in the production structure that is made or ordered to be made without the help offered by freely floating prices is nothing but a groping in the dark, replacing one arbitrary array of goods offered by another equally arbitrary one. There is simply no connection anymore between the production structure and the structure of demand. On the level of consumer experience this means, as has been described by G. Reisman, “… flooding people with shirts, while making them go barefoot, or inundating them with shoes while making them go shirtless; of giving them enormous quantities of writing paper, but no pens or ink, or vice versa; … indeed of giving them any absurd combination of goods.” But, of course, “… merely giving consumers unbalanced combinations of goods is itself equivalent to a major decline in production, for it represents just as much of a loss in human well-being.” The standard of living does not simply depend on some total physical output of production; it depends much more on the proper distribution or proportioning of the various specific production factors in producing a well-balanced composition of a variety of consumer goods. Universal price controls, as the ‘ultima ratio’ of conservatism, prevent such a well-proportioned composition from being brought about. Order and stability are only seemingly created; in truth they are a means of creating allocational chaos and arbitrariness, and thereby drastically reduce the general standard of living.

—Hans-Hermann Hoppe, A Theory of Socialism and Capitalism (Auburn, AL: Ludwig von Mises Institute, 2010), 103-104.