Smoot-Hawley and the New Deal are hardly the only examples of government actions making a panic worse.
Thomas Sowell recounts several instances in which governments turned small problems into major ones by using blunt force—often price controls—to respond to public panic about rising costs of a given commodity.
One of the more famous examples of this is the gasoline crisis of the 1970s, which started when the federal government took a small problem (temporary high costs of gasoline) and turned it into a big one (a national shortage).
As Sowell explains, however, there was not an actual scarcity of gasoline. There was nearly as much gas sold in 1972 as the previous year (95 percent, to be precise).
Similar examples kind be found throughout history, from the grain shortages in Ancient Rome brought about by Diocletian’s “Edict on Maximum Prices” to the mortgage crisis in 2007.
It is no coincidence that crises—foreign wars, terrorist attacks, and economic depressions—have often resulted in vast encroachments of freedom and even given rise to tyrants (from Napoleon to Lenin and beyond). In his book Crisis and Leviathan, the historian and economist Robert Higgs explains how throughout history, crises have been used to expand the administrative state, often by allowing “temporary” measures to be left in place after a crisis has abated (think federal tax withholding during World War II).
Like an economic panic, pandemics incite mass fear, which can lead to flawed and irrational decision making.
Data analyzed from the Fraser Institute’s Economic Freedom Index makes a solid case for the benefits of more individual economic freedom and less central planning.
Across time and comparing all levels of society, be it communities, States or between countries, those with more economic freedom as measured by the Economic Freedom Index enjoy…
- Less unemployment
- Higher incomes
- Less poverty
- Less income inequality
- Less gender inequality
- Less child labor abuses