America Loves Price Controls

Matt Yglesias says the conventional wisdom is not on the side of price controls:

When I took economics, we had a little squib in there about price controls. But it was about something nobody would actually think to do these days . . . mandatory cheap bread or something. It was a historical example. At any rate, it's overwhelming conventional wisdom in the United States that price controls are bad.

But are price controls really that unpopular? What about, I dunno, limits on executive compensation?

I think there's a tendency to think about "price controls" as things that apply to sacks of flour during wartime or barrels of oil in the 70s. You know: real stuff, that you can produce and consume and hold in your hands. But look, there are controls on the price of labor all over the place, and a lot of them are extremely popular. The minimum wage, as far as I know, is a price control that is extremely popular.

What I find interesting is that the conventional wisdom would, as Matt says, coalesce very quickly on the view that any proposed price ceiling or floor on Diet Coke is a terrible idea. But when you start talking about the labor market, the C.W. gets scrambled. Why is that? Are the feedback loops that determine prices in the labor market just thought of as really crappy? Or are we less comfortable following economic logic down this particular rabbit hole when human welfare is most obviously and viscerally at stake?

(Those questions are meant seriously. I'm genuinely curious why this difference in public opinion occurs!)

Update: Mark Thoma of the indispensable Economist's View emails:

One answer could be that even if the degree of market failure is the same in labor and soft drink markets, the harm to individuals is much larger (monetarily and in utility terms) for the labor market case (because it has a larger impact on the budget).

There may also be exploitable rigidities in labor markets (workers who can't leave a job because they'd lose health care, have to move their kids out of existing schools, etc.) that generate market failures, and a minimum wage prevents employers from using this as a means of pushing wages too low.