There's a lot of talk in Washington these days about “fake news.” Misinformation is a serious concern. If people believe misinformation and act upon it, bad things can happen. Yet for all the concern about misinformation in the news, neither side of the aisle seems concerned about misinformation in the economy. In fact, both sides routinely advance policies that do nothing but generate economic fake news. These usually come in the form of price controls and they too make bad things happen.
When most people think about prices, they probably only think about a particular price for a good or service they need or want and whether or not they have enough to pay that price. People need to do more thinking about what a price actually represents. When people are surprised by prices, they start doing calculations in their head. How could this thing that is only made of a dollar's worth of material cost $10? How come you can buy a five bedroom house in the Atlanta suburbs for the same price as one bedroom condo in Alexandria, Virginia? Why are there plumbers with high-school diplomas making more money than people who spent years studying in universities?
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