This is a Cato special podcast. I'm Caleb Brown.

Price controls degrade quality. In economics, not many statements get such broad agreement.

Even top advisors to President Obama agree that price controls are usually a bad way to improve quality and access.

So why are price controls such a key component of Obamacare?

Michael Cannon, Director of Health policy studies at the Cato Institute, comments.

Larry Summers is one of President Obama's top economic advisors, and he probably spoke for the entire economics profession when he said and I'll quote him

price and exchange controls inevitably create harmful economic distortions both the distortions and

the economic damage get worse with time."

The reason that economists are so hostile to price controls

is the government can ban certain prices.

If the government thinks that prices are too high,

it can force producers to lower them but that

doesn't change the economic reality underlying those prices if it costs

$20 to produce a widget and the government forces widget makers to sell them for only 10,

well you're not going to get very many widgets produced.

And so there's going to be an artificial shortage and that's one of the distortions and forms of economic

damage that Larry Summers spoke about.

You'll see a lot of price controls when you look at the Democrats health care legislation.

In fact, the centerpiece of that legislation and one of the main selling points is a price control scheme that the government would impose on health insurance.

Both the House and the Senate legislation would, as President Obama says, ban or prohibit insurers

from denying coverage for preexisting conditions.

What he means when he says that is that the legislation would force

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