In 1941, Leon Henderson (no relation), the head of the Office of Price Administration, chose John Kenneth Galbraith as his economist to control prices. This was a few months before the U.S. government officially entered World War II. Galbraith learned very quickly that controlling prices in a complex economy is--complex. In John Kenneth Galbraith: His Life, His Politics, His Economics, Richard Parker quotes from Galbraith's autobiography, A Life in Our Times:
On my first Sunday in office I went to the Blaine Mansion and sat down by myself with the Census classification of American industry. From this I derived the subdivisions of my office--nonferrous metals; fuel; steel and iron and steel products; textiles, leather, and apparel; and so forth. It seemed almost too simple.
It was too simple. As the complexity of their task and the requisite bureaucracy grew, so did the intricacy of these divisions. Soon under textiles and apparel came clothing: under clothing, footwear; under footwear, a section for soles and another for (reclaimed) rubber heels. For the soles-and-heels people at OPA to estimate quality and grade accurately, they recruited Washington postmen and carefully measured the wear-and-tear on their footwear. (Galbraith himself fell prey to the obsession over detail; one memo to Henderson somberly begins, "A big move is coming very soon on the sardine and pilchard situation . . ."
Then came the Japanese government's attack on Pearl Harbor on December 7. Galbraith took action. Parker writes:
But Galbraith felt no panic on December 8. Reaching his office shortly before dawn, he quickly and practically plotted out the most urgent tasks he faced. When the regional community exchanges opened in a few hours, prices would start spiraling upward almost immediately, so he arranged for cables to be sent to the exchanges--most important, the one in Chicago--to place limits on the daily increases in wheat, soybeans, butter, eggs, and other products. He then ordered aides to wire or call executives at major companies, and place limits on the prices of dozens of other products that would face immediate speculate pressures.
His obviously necessary actions nonetheless brought howls from Congress within hours of its voting for war that afternoon.
The first paragraph above is simply factual. But the last sentence of the quote is shocking. "Obviously necessary?" Remember that Parker is an economist writing about another economist. One of the conclusions most settled in economics is that ceilings on prices cause shortages. It turns out that these ceilings were no exception to that conclusion. So one would think that Parker would want to explain why these ceilings were a good idea. But not only does he not do so but also he begs the question by simply calling the ceilings "obviously necessary."