We all have noticed the higher cost of living lately, most notably in food and housing. As usual, a host of politicians are proposing the same short-sighted solutions that have failed spectularly thousands of times in the past. Math, economics, and basic human psychology never seem to factor into their proposals. Their politically popular quick fixes only add to the problems which they themselves have caused to begin with by messing with the market dynamics of supply and demand.

For example, rents and housing costs are astronomically high now. How do we bring prices down? Answer: increase supply and decrease demand. A common politician solution is to impose rent controls or assess a penalty on landlords who “make too much profit.” What’s the effect of these? There is less incentive to build new apartments, which only exasperates the supply shortage and increases prices more. Rent price fixing also has secondary effects on housing quality. If landlords must accept a lower rent, they have no incentive to fix problems, clean facilities, renovate, or add amenities. The “slum lord” owner has been almost entirely a government creation. In addition to disincentived property improvement, often the rent controls eliminate so much of the profit margin landlords may not be able to afford improvements even if they wanted to make them.

How about the demand side of rent control? The government-mandated lower rent often motivates renters to take on more housing than they need. In a free market, they may only be able to afford a 1-bedroom place. But with rent controls, maybe now they get a 2-bedoom, with one room that largely remains unused. Result: less available housing supply. In a free market, when rent prices get too high, more people are motivated to share appartments. Young adults are more likely to live a few more years with their parents. Net effect: demand for housing falls, and therefore rent prices fall.

Minimum wage laws similarly have unintended consequences. When employers must pay more than market rates, they’re more likely to increase automation or put more demands on existing staff. Fewer internships and entry-level jobs are offered. As for the effect on prices, minimum wages add costs to employers, who then must raise their prices. That means all of society pays more, including the people with a higher minimum wage. Retail and restaurant workers nowadays are starting out at $15+ an hour, a common pay goal for years of the Bernie socialists. Can these workers afford more now that they have this inflated pay? It doesn’t matter how much money you have, it matters what you can buy with that money.

Government-enforced union wages in the construction industry and taxes on suppliers of materials (include tariffs) drive up housing costs. Inflationary federal spending keeps interest rates high, adding yet another disincentive to build.

Government intervention can go beyond price disruption to create even more unintended negative effects. During the Great Depression, the government started subsidizing the production of corn to stabilize farmer incomes and ensure the supply of a critical food staple. Those subsidies have continued to this day, and since Iowa is such a critical primary state, no politician with presidential aspirations wants to mess with them. This has created an oversupply of corn to the detriment of other crops. One of the the most unhealthy and obesity-inducing products used in the market nowadays is high fructose corn syrup. The corn subsidies have made HFCS so cheap that it’s used in 1000s of sweet products on our shelves, especially in soda. So, the government is subsidizing obesity, in addition to the fact that other foods are more expensive since other crop supplies are reduced to plant more corn.

When government messes with prices, they often end up applying bandaid upon bandaid to fix the problems, creating a spiral of  even more problems. Another example from the Great Depression was the Agriculture Adjustment Act’s attempt to raise farm product prices by reducing the oversupply of certain crops and livestock. This resulted, as absurdly as it sounds, plowing under endless acres of cotton and wheat, burning oranges in kerosene, and slaughtering millions of hogs and cattle…at a time when most of the f-cking population was starving!!! Historians of the Soviet Union and China could give you an endless list of more examples of how government “managed economies” led to mass starvation.

Taxes, subsidies, price controls, regulation…they all create a list of endless problems that the market would take care of if left alone, without the undesirable side effects. It shouldn’t come as a surprise that the four areas of our economy with the most government intervention (education, health care, food, and housing) have increased in price several times faster than the inflation rate of the economy as a whole. But hey, maybe next time it will work. Let’s elect more communist and socialist politicians to find out. 👍

Blog Link: https://educationdojo.com/articles/2025/07/random-thoughts-on-rent-controls-minimum-wage-and-subsidies/

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