Ashby’s Law and “Phase Four Souvlaki”

When I lived on Capitol Hill forty years ago, another odd-ball from the Marine Corps Reserve, Larry Feldman, and I frequented a certain Greek restaurant for souvlaki. Sometimes we had other things, but the souvlaki was great.

During the Nixon Administration, inflation got out of hand, and the President imposed Wage and Price Controls (always capitalized!). A 90 day freeze somehow became a thousand days of monkeying with wages and prices, known as Phases One through Four. Wikipedia will tell you more than you want to know, including: “The controls helped Nixon to re-election, but afterwards were seen to be a total failure; meat disappeared from grocery store shelves and Americans protested wage controls that didn’t match up to inflation.” And, “In these phases, the controls were applied almost entirely to the biggest corporations and labor unions, which were seen as having price-setting power. However, 93% of requested price increases were granted and seen as necessary to meet costs.”

My friend Larry and I had a phrase that captured the absurdity of Wage and Price Controls, at least as imposed by Nixon. We talked about “Phase Four Souvlaki,” which had gotten smaller and smaller. It will come as no surprise to you to learn that as prices for meat and sour cream went up, the size of the souvlaki serving went down, since its price was “frozen” by the wage and price controls. Duh!

I learned later that this is not only a lesson in feedback loops at the wholesale and retail levels, but also a great example of Ashby’s Law of Requisite Variety!
The government simply had no chance of enforcing its wage and price controls! How many inspectors do you think it would have taken to weigh portions at all the restaurants across America each day? You can’t get there from here.

Wage and Price Controls haven’t been tried across the United States since then, but I’ve no idea whether they’ve been forgotten or whether someone somewhere learned about Ashby’s Law.

Even though Ross Ashby was still in school when Prohibition in the United States ended, some observers of Prohibition (always capitalized) have observed the “Ashby’s Law” problem.

As noted in Wikipedia, “A total of 1,520 Federal Prohibition agents (police) were given the task of enforcing the law.” And also, “Many of Chicago’s most notorious gangsters, including Al Capone and his enemy Bugs Moran, made millions of dollars through illegal alcohol sales. By the end of the decade Capone controlled all 10,000 speakeasies in Chicago and ruled the bootlegging business from Canada to Florida.”

Fifteen hundred agents? Ten thousand speakeasies in Chicago alone? Gimme a break!

Oh, and did I mention “unintended consequences?” As John D. Rockefeller, Jr., said, “When Prohibition was introduced, I hoped that it would be widely supported by public opinion and the day would soon come when the evil effects of alcohol would be recognized. I have slowly and reluctantly come to believe that this has not been the result. Instead, drinking has generally increased; the speakeasy has replaced the saloon; a vast army of lawbreakers has appeared; many of our best citizens have openly ignored Prohibition; respect for the law has been greatly lessened; and crime has increased to a level never seen before.”

Are there lessons here for those that decide how governments tackle problems? That is, the designers of government?

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