All Commentary
Monday, May 1, 2000

Freedom of the Price

Censoring Price Communication Reduces Information and Incentives

Last month I explained why our liberties will be steadily eroded without a genuine commitment to liberty in general.

Fortunately some liberties are widely recognized as crucial and have influential interests protecting them from political violation. An interesting example is freedom of speech—freedom against government censorship. Recent examples of the censorship of politically incorrect speech have occurred on, of all places, state college campuses, and too much of this censorship remains, even if unofficially, despite court decisions outlawing it. But the freedom to communicate in speech and writing is for the most part protected. If the government attempts to censor the news media (even in the name of national security) there is an immediate and powerful outcry from journalists. (Remember the Pentagon Papers.) We can be proud of our long tradition of freedom of the press and appreciative of the journalism profession for helping protect that freedom. At best, however, journalists deserve only two cheers for resisting censorship, since they not only condone, but often report sympathetically on, a very pernicious type of censorship.

As valuable as the communication of the news media is, it is less valuable than communication through market prices. As I have explained in earlier columns, the global cooperation that provides our wealth and protects our freedoms would be impossible without the information and motivation communicated through market prices. Yet governments routinely distort this communication with policies that force prices above or below what they would be in a free market. This price censorship violates our right of free expression as much as government’s dictating the content of daily newspapers and TV news.

Minimum-wage laws censor unskilled youth who would like to communicate with potential employers: “I have few skills and college is not feasible, so I am willing to work for little now while I have few financial responsibilities to acquire the on-the-job training that will allow me to be more productive later.” Agricultural price supports victimize all families by censoring the ability of farmers to communicate with them. Without that censorship dairy farmers, for example, would communicate that they are willing to make more milk available to children (and adults) by lowering milk prices. This censorship is particularly harmful to poor families because they devote a larger percentage of their budgets to basic foods than do wealthy families.

The censorship of rent control prevents people from communicating their desire for housing space through higher prices. The result is that people who would be willing to provide additional housing don’t have adequate information on how valuable the housing is and little motivation to provide the right amount even if they did. Rather than helping the poor, who are supposedly the beneficiaries of rent control, the available housing space generally goes to well-connected nonpoor families; the poor end up with less housing than they would have been willing to pay for in an open market and are often relegated to the squalor of public housing. If journalists were as informed as they want us to believe, and as socially concerned as they claim, they would help the poor by attacking price censorship with the same fervor as they do press censorship.

Journalists can fill newspapers and news broadcasts with stories of jobless teenagers, write compellingly of the need to increase the availability of food to the nation’s poor, and urge landlords to make more low-income housing available. But the effectiveness of this free expression is nil compared to the free expression that would allow lower wages, lower food prices, and higher housing prices.

I am not arguing that we should be complacent about low wages and farm incomes, or high rents. But we should recognize that low wages and incomes and high rents are only the symptoms of the problems that should concern us. Low wages inform us that productive skills are lacking; low farm incomes send a message that some farmers would create more value elsewhere in the economy; and high rents tell us that housing space should be expanded. We may not like the news communicated through market prices, but that is no reason for censoring it. No one would suggest that we censor news of natural disasters, political scandals, or outbreaks of disease. We may not like to hear such news, but suppressing it would reduce our ability to respond in ways that reduce the costs of such unfortunate events. Similarly, censoring price communication reduces the information and incentive needed to respond appropriately to the problems created when our efforts and resources are not being directed to their most urgent employments.

Harming the Poor

Some will object that the freedom of price communication puts those with few financial resources at a disadvantage. If this argument were correct, it would also be true that the traditional freedom of expression discriminates against those lacking education and the ability to express themselves. But no one is put at an absolute disadvantage by the freedom to communicate either through prices or words. Obviously those who are knowledgeable and articulate benefit from free speech, but can anyone believe that censoring verbal and written communication would help the ignorant and inarticulate? The best hope for acquiring knowledge and developing intellectual skills is through the free flow of spoken and written information. Similarly, the best hope for the poor is through the free flow of market communication, which informs them of their best opportunities, motivates them to increase their productivity by taking advantage of those opportunities, and keeps others responsive to their preferences and concerns.

No one would argue that price communication is always completely honest and accurate. But who is prepared to argue that distortions and misrepresentations are not easily found in newspapers, magazines, books, and TV and radio programs? Such imperfections can never be eliminated, but the most effective way of moderating them is not through censorship but through the competition of free expression, as any self-respecting journalist will quickly inform you. But any journalist informed enough to warrant self-respect should also recognize that the most effective way of moderating the imperfections in price communication is by allowing more competition in price communication, not by stifling that competition with price censorship.

Journalists should understand the importance of freedom in communication. And certainly no group is as quick to defend that freedom, or more articulate at making the case for it, than journalists. But if journalists were fully committed to freedom of communication, they would find price censorship just as abhorrent as press censorship.

  • Dwight R. Lee is the O’Neil Professor of Global Markets and Freedom in the Cox School of Business at Southern Methodist University.