This week’s Friday Quote is a long one:
Why do price controls cause shortages? There are basically two reasons: supply and demand.
People will not supply as much at a lower price as they will at a higher price. Some oil wells that will repay their costs and earn a profit when the price of oil is $25 a barrel will not cover their costs when the price is $15 a barrel. Some people who will rent out a bungalow in their backyard when rents are high will not bother when rents are low. Some farmers will give up farming when food prices are kept below the point where they can earn a living.
On the demand side, people will demand more when the price is kept artificially low by price controls. Before rent control laws were passed in Sweden, less than one-fourth of unmarried adults there had their own separate housing units, but afterwards more than half did. People buy more of anything that is cheaper. With more being demanded and less being supplied, shortages are inevitable, whether with housing, food, medical care or whatever.
This applies to guns/ammunition as well. As demand kicks in (thanks, Mr. President!), prices must go up. There might be some price stability as businesses pay the opportunity costs (forgoing additional revenue to offset their own higher costs) in order to maintain customer loyalty. That will last only if the demand spike is of a short duration. If we as customers demand that businesses keep prices the same, the effect will be the same – shortages.
Now, why can’t I find ammo?