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112 Economics in One Lessonor stop the production of certain items. This means unemployment,a shrinkage in production and a decline in living standards.5What lies at the base of the whole effort to fix maximum prices?There is first of all a misunderstanding of what it is that has been causingprices to rise. The real cause is either a scarcity of goods or a surplusof money. Legal price ceilings cannot cure either. In fact, as we have justseen, they merely intensify the shortage of goods. What to do about thesurplus of money will be discussed in a later chapter. But one of theerrors that lies behind the drive for price-fixing is the chief subject ofthis book. Just as the endless plans for raising prices of favored commoditiesare the result of thinking of the interests only of the producersimmediately concerned, and forgetting the interests of consumers, sothe plans for holding down prices by legal edict are the result of thinkingof the interests of people only as consumers and forgetting their interestsas producers. And the political support for such policies springsfrom a similar confusion in the public mind. People do not want to paymore for milk, butter, shoes, furniture, rent, theater tickets, or diamonds.Whenever any of these items rises above its previous level the consumerbecomes indignant, and feels that he is being rooked.The only exception is the item he makes himself: here he understandsand appreciates the reason for the rise. But he is always likelyto regard his own business as in some way an exception. “Now myown business,” he will say, “is peculiar, and the public does not understandit. Labor costs have gone up; raw material prices have gone up;this or that raw material is no longer being imported, and must bemade at a higher cost at home. Moreover, the demand for the producthas increased, and the business should be allowed to charge theprices necessary to encourage its expansion to supply this demand.”And so on. Everyone as consumer buys a hundred different products;as producer he makes, usually, only one. He can see the inequity inholding down the price of that. And just as each manufacturer wants ahigher price for his particular product, so each worker wants a higherwage or salary. Each can see as producer that price control is restricting