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ii. Interference by Price Control 1. The Alternative: Statutory Law versus Economic Law Measures of price control are directed at fixing prices, wages, and interest rates at amounts different from those prevailing in the unhampered market. The authority or the group expressly or tacitly entrusted by the authority with power to control prices fixes them as maximums or minimums. The police power is used to enforce these decrees. The aim underlying such interference with the price structure of the market is either to privilege the seller (in the case of minimum prices) or to privilege the buyer (in the case of maximum prices). The minimum price should make it possible for the seller to achieve better prices for the goods he is offering; the maximum price should enable the buyer to acquire the goods he desires at a lower price. It depends on political conditions just which group the authority will favor. At times maximum prices have been established, at times minimum prices; at times maximum wages, at times minimum wages. Only for interest rates have there been only maximums, never minimums. Political expediency has always demanded such a course. Out of the controversies over governmental regulation of prices, wages, and interest rates, the science of political economy developed. For hundreds and even for thousands of years the authorities have attempted to influence prices through the use of their power apparatus. They have imposed the heaviest penalties on those who refused to obey their orders. Innumerable lives have been lost in this struggle. In no other field has the police force displayed more eagerness to use its power, and in no other case has the vindictiveness of the authorities found more enthusiastic support by the masses. And still all these attempts failed of their objective. The explanation which this failure has found in the philosophical, theological, political, and historical The Alternative  25 literature precisely reflects the opinion of the authorities and of the masses. It was maintained that human beings were egoistical and bad by nature and that the authority had been too weak and too reluctant to use force; what were required were hard and ruthless rulers. Realization of the truth had its origin in the observations of the effects of such measures in a narrowly confined field of application. Among the price control measures, particular importance attaches to the attempts of the authority to impart to debased coins the same value as to coins of full metallic content, and to maintain a fixed exchange ratio between the precious metals gold and silver, and later between metallic money and depreciated paper money. The reasons which caused the failure of all such attempts were early realized and were formulated in the law named after Sir Thomas Gresham.* From these early beginnings it was still a long way to the great discoveries of the Scottish and English philosophers of the eighteenth century, that the market followed certain laws which bound all market phenomena in a necessary relation. The discovery of the inevitable laws of the market and exchange was one of the great achievements of the human mind. It laid the cornerstone for the development of liberal sociology† and gave rise to liberalism and thus brought with it our modern culture and economy. It paved the way for the great technological achievements of our time. It was at the same time the starting point of a systematic science of human action, that is, of economics. The pre-scientific mind distinguished between the good and the bad, the just and the unjust in human action. It believed that human behavior could be evaluated and judged by the established standards of a heteronomous moral law. It thought that human action was free in the sense of not being subject to the inherent laws of human behavior. Man should, it argued, act morally; if he acted differently God would punish him in the hereafter if not during his lifetime; man’s actions do not have any other consequences. Therefore, there need be no limit to what the authority might do as long as it did not come in conflict with * [Sir Thomas Gresham (1519–1579) pointed out that debasing the money led to a decline in the value of English coins and to gold’s leaving the country and thus was credited with developing “Gresham’s law.” Also see below, p. 47.—Editor] † [Mises uses “sociology” here to mean the science of human action. He later came to consider “sociology” inexpedient for use in...

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