Few would connect the water shortage in California with the stickers/plates/cards problem of the Philippine Land Transportation Office. But they both illustrate the inescapable consequences of price control.
By favoring government use or dictation of resources, a subsidy is in effect created. This constitutes price control because the concerned resources are made available to the coercing/monopolizing body at less cost/effort/competing demand than if these were obtained through bidding among free entities.
Step by step, ooh baby
Ludwig von Mises explained the stages of price control. At first comes the shortage of goods. What is obtained cheaper, is used up faster. What’s more, the artificially low price serves as a signal to investors and producers not to divert resources to the sector. So no, high prices are not the devil, they are the best incentive for people to supply the desired good. It is by this principle that yesterday’s luxury product, whose broad appeal is yet uncertain, becomes available to the masses to the point of being taken for granted.
The next stage of price control is the attempts at rationing. Which does nothing to sustain supply, since no prices are involved. After rationing comes outright state takeover to replace those greedy capitalists who are said to have caused the shortage in the first place. Again, without prices as guide, much is wasted, not just in the particular controlled sector but in other sectors which otherwise would have been patronized by consumers had a market been present.
It’s left for us to imagine how private driver certifiers would fare. Maybe they would have done away with rectangular pieces of plastic altogether, who knows.
And where would Californians have lived had there not been such a huge water subsidy to draw people to arid lands? Such alternate realities might seem unpleasant in their unfamiliarity, but this is no reason to maintain policies contributing to economic disasters. We can trust people will get by, if not thrive, without them.