Hail to Prices; J. Lee

14. The top income-tax rate was reduced from 70 percent to 28 percent in the '80s, but the top 5 percent of all earners paid more taxes, increasing their share of all federal income taxes paid from 36 percent in 1980to 43 percent in 1990. 15. In the 1980s, the percentage of Afri can-American families earning more than $50,000 in real dollars doubled from 7 to 14 percent, the unemployment rate for black teenagers fell by 21 percent and black em ployment in professional and managerial jobs expanded by one-third. After declining 10 percent between 1978 and 1982, the real median income of black families increased by 17 percent between 1982 and 1989. 16. From 1982 to 1987, the number of black-owned businesses increased by 38 percent, triple the overall business growth THEFREEMAN IDEASON LIBERTY Hail to Prices! by Jeffery G. Lee R ecently in South Korea I had an expe rience that bodes poorly for propo nents of price controls. During my stay, a Korean friend, D.J., took me to a bar to soak up a bit of local flavor. After a good time, my friend and I left the bar just before midnight in search of a cab. As we were going in Mr. Lee resides in Long Beach, California.

rate during that period. The number of new Hispanic-owned businesses soared by 81 percent. 17. The median weekly earnings of fe male workers grew 8 percent faster than male earnings in the 1980s, and women entrepreneurs ended the decade employing more people than all of the Fortune 500 companies combined. The number ofwom enowned firms expanded by 57 percent in the '80s and the sales volume of these firms tripled. 18. Following the double-digit annual in flation rates of 11.3 percent, 13.5 percent, and 10.3percent during the Carter years, the annual inflation rate averaged 3.9 percent in the two Reagan terms. Scoring: Each of the above statements is True. All information is based on Labor Department and Census Bureau studies. Readers missing more than 12 questions are eligible for. Rhodes Scholarship assistance. D separate directions, I said goodbye and prepared to flag down a taxi. D.J., however, knew something I didn't and stayed with me despite my assurances that I could handle myself. I'm thankful he stayed.

I was completely unprepared for what happened. Crowds of people began creeping dangerously far out into the street. D.J. joined the fray, facing the oncoming taxis like a modern-day matador. Cabs slowed just enough for D.J. and others to yell their desired destinations into the open window (Pangbae Station in our case). Without fail, after hearing the places we and others were intent on going, cab after cab sped off leaving us in clouds of exhaust and bewil derment. After about 20 minutes, it was apparent that it might take a while to actually get picked up. Interestingly, D.J. "upped the ante" for the ungracious drivers. "Pang bae!" -in endless repetition-had been all that I had heard for nearly a half-hour when my friend began yelling "Pangbae DOU BLE!" He even yelled "Pangbae TRIPLE!"at a driver who stopped only long enough to flash four fingers hoping for four times the normal fare. Later, we stopped a taxi with a "triple." We got in, only to be told to get out when the driver reconfirmed our destina tion. He said he had misunderstood us and wouldn't go to Pangbae Station.

Later I discovered the reason for this black market in transport. Taxi rates are set by the government. Ostensibly to protect the consumer, the government limits the price taxi companies can charge. The con sequence of such myopic legislation should be obvious to any first-year economics stu dent. The artificially low fare not only re duces the supply of taxis, but decreases the incentive of remaining drivers to provide good services to passengers. Full of good but misdirected intentions, government of ficials have taken it upon themselves to protect the consumer. Ironically, the result is just the opposite. As with all examples of price control throughout history, demand exceeds supply when an artificially low price is mandated, resulting in various de grees of chaos. After an hour and a half we flagged down a willing driver and made it home. Because our quest was limited to cross-town transHAIL TO PRICES! 453 portation, the most we suffered was the indignity of standing in the middle of the road, in addition to a few lost hours of sleep.

Raise the stakes from the taxi scenario and consequences are more devastating. Instead of commuters, picture physically ill folks clamoring for healthcare professionals. "Pangbae double!" might suffice as a po tential solution when negotiating for some thing as simple as a ride. I don't imagine, however, an equally likely "heart attack double!" would be a very amenable strat egy. Low prices might appear to the uniniti ated as desirable. But prices are no culprit. Prices provide ready information on the availability of goods and services, and on the values of goods and services to compet ing would-be users. Attempts to artificially alter prices are tantamount to removing signs from dangerous roads. Prices fairly balance the amounts of a good available and the amounts demanded. Of course, prices are also the most visible and easily targeted feature ofa market economy. Unfortunately, politicians, eager to placate their benefactors, have more influence than economic truths on the formation of public policy.

I do not mean to insinuate any backward ness on the part of Korea (which would upset my Korean wife immeasurably). It just so happened that this experience re minded me of the endless gas lines of the 1970s and of the recent debate over health care in the United States. As economically enlightened as we are in America, we are not immune to a "calculated reversion" to the illogic of price controls. Symptomatic cures for what some may see as the pestilence of prices are misdirected. Hopefully, people can now see through quick-fix solutions to economic problems. If not, maybe some thing as simple as a taxi ride in Korea would be sufficient to cure their economic myopia. D Potomac Principles Freedom from Taxes? by Doug Bandow WASHINGTON-Income tax day may be behind us, but the pain is not over. We are still working for government, and we won't be finished until the middle of this month. According to the Tax Foundation, the average American had to labor 126days-to May 6-to pay his or her taxes this year.