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Government Price-Fixing 109Passing over the administrative difficulties involved in this, and assumingthat the subsidy is just enough to assure the desired relative productionof milk and butter, it is clear that, though the subsidy is paidto producers, those who are really being subsidized are the consumers.For the producers are on net balance getting no more for their milkand butter than if they had been allowed to charge the free marketprice in the first place; but the consumers are getting their milk andbutter at a great deal below the free market price. They are being subsidizedto the extent of the difference—that is, by the amount of subsidypaid ostensibly to the producers.Now unless the subsidized commodity is also rationed, it is thosewith the most purchasing power that can buy most of it. This meansthat they are being subsidized more than those with less purchasingpower. Who subsidizes the consumers will depend upon the incidenceof taxation. But men in their role of taxpayers will be subsidizingthemselves in their role of consumers. It becomes a little difficultto trace in this maze precisely who is subsidizing whom. Whatis forgotten is that subsidies are paid for by someone, and that nomethod has been discovered by which the community gets somethingfor nothing.3Price-fixing may often appear for a short period to be successful. Itcan seem to work well for a while, particularly in wartime, when it issupported by patriotism and a sense of crisis. But the longer it is ineffect the more its difficulties increase. When prices are arbitrarily helddown by government compulsion, demand is chronically in excess of supply.We have seen that if the government attempts to prevent a shortageof a commodity by reducing also the prices of the labor, raw materialsand other factors that go into its cost of production, it creates ashortage of these in turn. But not only will the government, if it pursuesthis course, find it necessary to extend price control more andmore downwards, or “vertically;” it will find it no less necessary toextend price control “horizontally.” If we ration one commodity, andthe public cannot get enough of it, though it still has excess purchasing