[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.53,0:00:03.50,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:14.30,0:00:16.76,Default,,0000,0000,0000,,- [President Nixon] I am today \Nordering a freeze
Dialogue: 0,0:00:16.76,0:00:20.17,Default,,0000,0000,0000,,on all prices and wages \Nthroughout the United States.”
Dialogue: 0,0:00:21.26,0:00:24.75,Default,,0000,0000,0000,,– [Announcer] In August of 1971,\Nin an attempt to control inflation,
Dialogue: 0,0:00:24.75,0:00:27.08,Default,,0000,0000,0000,,President Richard Nixon simply \Ndeclared that
Dialogue: 0,0:00:27.08,0:00:29.62,Default,,0000,0000,0000,,price increases\Nwere now illegal.
Dialogue: 0,0:00:29.62,0:00:31.52,Default,,0000,0000,0000,,Soon after Nixon's declaration,
Dialogue: 0,0:00:31.52,0:00:33.98,Default,,0000,0000,0000,,the situation in many markets\Nstarted to look like this.
Dialogue: 0,0:00:34.48,0:00:37.18,Default,,0000,0000,0000,,The market equilibrium price \Nwas above the current price,
Dialogue: 0,0:00:37.18,0:00:39.97,Default,,0000,0000,0000,,but it was illegal to raise prices.
Dialogue: 0,0:00:39.97,0:00:41.66,Default,,0000,0000,0000,,Prices were hitting the ceiling,
Dialogue: 0,0:00:41.66,0:00:43.99,Default,,0000,0000,0000,,the maximum price \Nallowed by law.
Dialogue: 0,0:00:44.48,0:00:47.24,Default,,0000,0000,0000,,With a price ceiling, \Nbuyers are unable
Dialogue: 0,0:00:47.24,0:00:50.08,Default,,0000,0000,0000,,to signal their increased demand \Nby bidding prices up.
Dialogue: 0,0:00:50.08,0:00:52.06,Default,,0000,0000,0000,,And suppliers in turn \Nhave no incentive
Dialogue: 0,0:00:52.06,0:00:56.16,Default,,0000,0000,0000,,to increase the quantity supplied \Nbecause they can't raise the price.
Dialogue: 0,0:00:56.16,0:00:59.18,Default,,0000,0000,0000,,The result is a shortage, shortage.
Dialogue: 0,0:00:59.18,0:01:02.52,Default,,0000,0000,0000,,The quantity demanded \Nexceeds the quantity supplied.
Dialogue: 0,0:01:02.52,0:01:06.34,Default,,0000,0000,0000,,For example, in the 1970s, \Nprice ceilings on gasoline meant
Dialogue: 0,0:01:06.34,0:01:09.56,Default,,0000,0000,0000,,that it was common to have no gas \Nat the gas station.
Dialogue: 0,0:01:10.84,0:01:12.80,Default,,0000,0000,0000,,However, the story \Ndoesn't end there.
Dialogue: 0,0:01:12.80,0:01:16.30,Default,,0000,0000,0000,,More people want to buy gasoline \Nthan there was gasoline available.
Dialogue: 0,0:01:16.30,0:01:18.20,Default,,0000,0000,0000,,So who gets the gasoline?
Dialogue: 0,0:01:18.20,0:01:21.41,Default,,0000,0000,0000,,Rather than compete for gasoline\Nby bidding up the price,
Dialogue: 0,0:01:21.41,0:01:24.86,Default,,0000,0000,0000,,buyers now competed by waiting \Nin longer and longer lines,
Dialogue: 0,0:01:24.86,0:01:27.86,Default,,0000,0000,0000,,in effect bidding up their time.
Dialogue: 0,0:01:27.86,0:01:29.91,Default,,0000,0000,0000,,In the '70s, people would wait \Nfor hours
Dialogue: 0,0:01:29.91,0:01:31.73,Default,,0000,0000,0000,,at the gas station to fill up.
Dialogue: 0,0:01:31.73,0:01:35.18,Default,,0000,0000,0000,,So while the monetary price \Nof gasoline doesn't rise,
Dialogue: 0,0:01:35.18,0:01:38.19,Default,,0000,0000,0000,,the price paid \Nin people's time did increase.
Dialogue: 0,0:01:39.16,0:01:41.84,Default,,0000,0000,0000,,Moreover, when buyers pay for\Ngasoline with money,
Dialogue: 0,0:01:41.84,0:01:43.33,Default,,0000,0000,0000,,the seller gets the money.
Dialogue: 0,0:01:43.33,0:01:45.54,Default,,0000,0000,0000,,When buyers pay \Nfor gasoline in time,
Dialogue: 0,0:01:45.54,0:01:46.87,Default,,0000,0000,0000,,the seller doesn't get the time.
Dialogue: 0,0:01:46.87,0:01:48.64,Default,,0000,0000,0000,,The time just gets wasted.
Dialogue: 0,0:01:49.60,0:01:50.76,Default,,0000,0000,0000,,Do you recall \Nfrom the previous videos
Dialogue: 0,0:01:50.76,0:01:53.07,Default,,0000,0000,0000,,how the price system \Ncoordinates the actions
Dialogue: 0,0:01:53.07,0:01:55.07,Default,,0000,0000,0000,,of thousands of people \Nall over the world
Dialogue: 0,0:01:55.07,0:01:56.75,Default,,0000,0000,0000,,in order to deliver flowers?
Dialogue: 0,0:01:56.75,0:02:01.77,Default,,0000,0000,0000,,Well, with price controls in place,\Nthe economy became dis-coordinated.
Dialogue: 0,0:02:01.77,0:02:04.14,Default,,0000,0000,0000,,Shortages of steel meant \Nthat construction workers
Dialogue: 0,0:02:04.14,0:02:05.24,Default,,0000,0000,0000,,had to be sent home \N
Dialogue: 0,0:02:05.24,0:02:07.13,Default,,0000,0000,0000,,and new building construction delayed.
Dialogue: 0,0:02:07.13,0:02:08.87,Default,,0000,0000,0000,,Factories and offices \Nhad to close
Dialogue: 0,0:02:08.87,0:02:10.94,Default,,0000,0000,0000,,when shortages meant \Nthey couldn't operate.
Dialogue: 0,0:02:10.94,0:02:14.43,Default,,0000,0000,0000,,And when they closed the firms \Nrelying on them had to close too.
Dialogue: 0,0:02:14.43,0:02:16.10,Default,,0000,0000,0000,,In perhaps the most ironic case, \N
Dialogue: 0,0:02:16.10,0:02:18.12,Default,,0000,0000,0000,,a shortage of steel \Ndrilling equipment
Dialogue: 0,0:02:18.12,0:02:21.42,Default,,0000,0000,0000,,made it difficult to drill for oil \Neven as the United States
Dialogue: 0,0:02:21.42,0:02:24.36,Default,,0000,0000,0000,,was undergoing the worst \Nenergy crisis in its history.
Dialogue: 0,0:02:24.36,0:02:26.73,Default,,0000,0000,0000,,And other odd\Nthings started to happen.
Dialogue: 0,0:02:26.73,0:02:29.57,Default,,0000,0000,0000,,In a market economy, \Nwhen it gets cold on the east coast
Dialogue: 0,0:02:29.57,0:02:31.80,Default,,0000,0000,0000,,and the demand for \Nheating oil increases,
Dialogue: 0,0:02:31.80,0:02:34.68,Default,,0000,0000,0000,,entrepreneurs ship oil \Nfrom where it has low value,
Dialogue: 0,0:02:34.68,0:02:36.69,Default,,0000,0000,0000,,here in sunny California, \Nand ship it
Dialogue: 0,0:02:36.69,0:02:39.33,Default,,0000,0000,0000,,to where it has high value \Nin cold New Hampshire.
Dialogue: 0,0:02:39.33,0:02:40.89,Default,,0000,0000,0000,,Buy low, sell high.
Dialogue: 0,0:02:40.89,0:02:44.42,Default,,0000,0000,0000,,With price controls in place, \Nhigh-value consumers of heating oil
Dialogue: 0,0:02:44.42,0:02:45.63,Default,,0000,0000,0000,,couldn't bid up the price,
Dialogue: 0,0:02:45.63,0:02:48.22,Default,,0000,0000,0000,,and so there was no incentive \Nfor entrepreneurs to bring oil
Dialogue: 0,0:02:48.22,0:02:50.04,Default,,0000,0000,0000,,to where it was in greatest demand.
Dialogue: 0,0:02:50.04,0:02:53.64,Default,,0000,0000,0000,,As a result, in the harsh winter \Nof 1972 to 1973,
Dialogue: 0,0:02:53.64,0:02:56.76,Default,,0000,0000,0000,,people were freezing on the east\Ncoast even as people elsewhere
Dialogue: 0,0:02:56.76,0:03:00.41,Default,,0000,0000,0000,,in the United States had enough\Noil to heat their swimming pools.
Dialogue: 0,0:03:00.64,0:03:03.32,Default,,0000,0000,0000,,And then, the chickens \Nstarted to drown.
Dialogue: 0,0:03:03.32,0:03:05.84,Default,,0000,0000,0000,,A price ceiling had been imposed \Non the price of chickens,
Dialogue: 0,0:03:05.84,0:03:07.83,Default,,0000,0000,0000,,but not on the price of feed.
Dialogue: 0,0:03:07.83,0:03:10.59,Default,,0000,0000,0000,,Farmers realized that \Nat the controlled price,
Dialogue: 0,0:03:10.59,0:03:13.43,Default,,0000,0000,0000,,they would actually lose money \Nif they fed their chicks
Dialogue: 0,0:03:13.43,0:03:15.69,Default,,0000,0000,0000,,to fatten them up and bring them \Nto the market.
Dialogue: 0,0:03:15.69,0:03:18.39,Default,,0000,0000,0000,,So the farmers drowned \Nmillions of baby chicks.
Dialogue: 0,0:03:18.39,0:03:20.90,Default,,0000,0000,0000,,- [Chick] “Thanks, price controls.”
Dialogue: 0,0:03:20.90,0:03:22.79,Default,,0000,0000,0000,,- [Announcer] The list of strange, \Nunintended consequences
Dialogue: 0,0:03:22.79,0:03:24.61,Default,,0000,0000,0000,,like these go on and on.
Dialogue: 0,0:03:24.61,0:03:25.75,Default,,0000,0000,0000,,In the next few videos,
Dialogue: 0,0:03:25.75,0:03:28.38,Default,,0000,0000,0000,,we'll dive deeper \Ninto price ceilings,
Dialogue: 0,0:03:28.38,0:03:30.45,Default,,0000,0000,0000,,the five types of effects they cause,
Dialogue: 0,0:03:30.45,0:03:33.18,Default,,0000,0000,0000,,and how to analyze these \Nusing supply and demand.
Dialogue: 0,0:03:34.84,0:03:36.43,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:03:36.43,0:03:37.59,Default,,0000,0000,0000,,If you want to test yourself,
Dialogue: 0,0:03:37.59,0:03:39.06,Default,,0000,0000,0000,,click "Practice Questions."
Dialogue: 0,0:03:39.81,0:03:43.33,Default,,0000,0000,0000,,Or, if you're ready to move on \Njust click "Next Video."
Dialogue: 0,0:03:43.33,0:03:46.80,Default,,0000,0000,0000,,♪ [music] ♪