How to produce a shortage

Just as minimum wages make the poor unskilled people unemployable, caps on salaries paid to people with rare but highly demanded talent make such professionals unavailable. What most people do not know is that such regulations of the labor market are justified by the Marxists theory of exploitation. And what is worse, the existing restrictions violate our natural liberties to "truck, barter, and exchange." We tend to forget that the West won the century-long economic race because of a legal precedent---ancient Romans institutionalizing the idea of property rights as absolute. The incorporation of Roman law into the Western medieval kingdoms, together with the significant powers vested in the Church, served as a check on the greed of monarchs and feudal lords who yielded their swords under the social contract as enforcers of law. And it is instructive to see how---during the great schism of the Western church and the rise of the secular state with its taxation, regulation, and inflation---the West experienced its first Great Depression.

When the Black Death (bubonic plague) decimated Europe in the 14th century (aided by famine due to global cooling), labor became more expensive. The English government decided to deal with the problem by imposing maximum wage controls. Unsurprisingly, government regulation deepened the crisis. "Economists may not know much." says Milton Friedman, "but we do know one thing very well: how to produce shortages and surpluses." Labor became so unavailable that the Crown started piling one crazy statute upon another---imposing forced labor at old wage rates for all men in England under the age of 60, restricting mobility of labor by making it a criminal offense to hire someone who had left his former master, compulsory child labor in agriculture, etc.

Government regulations did not solve the English problems in the 14th century. If anything, it prolonged the recovery. And our own restrictions are doing the same---despite their good intentions to protect consumers, workers, borrowers, and investors. And we shall continue to reap storms until we heed the words of 18th century French economist A.R.J. Turgot:

"There is no need to prove that each individual is the only competent judge of the most advantageous use of his lands and of his labor. He alone has the particular knowledge without which the most enlightened man could only argue blindly. He learns by repeated trials, by his successes, by his losses, and he acquires a feeling for it which is much more ingenious than the theoretical knowledge of the indifferent observer because it is stimulated by want."