#### Employment and Minimum Wage Dynamics The core issue with minimum wage policies is their direct impact on employment, particularly among unskilled workers and marginalized groups, such as minority youth. Raising the minimum wage, as seen with the U.S. Congress’s decision in 2007 to increase it to $7.25 in 2009, often risks making these populations less employable. This highlights a tension: while policymakers may seek to ensure a "living wage," the resulting market distortions can inadvertently increase unemployment in groups they set out to "protect." #### Price Fixing and Government Intervention Public perception often casts price fixing by private businesses as exploitative, while price fixing by governments is seen as protective. However, whether implemented by monopolistic businesses or governments, price fixing distorts the natural equilibrium of supply and demand. Governments fix wages to guarantee living standards, or cap prices on necessities like housing and food, under the guise of benefiting the public. Yet, such interventions mirror the price-setting behavior of monopolistic corporations. Government-enforced price fixing can lead to significant inefficiencies. Unlike businesses, governments possess coercive powers that magnify the negative consequences of these practices. History illustrates that durable price fixing cannot be maintained without governmental enforcement. Entities like OPEC have shown that collusion, without such force, collapses under market pressures—particularly when member states cheat by selling beyond quotas to capture greater market share. #### The Role of Supply, Demand, and Market Clearing Prices in a free market reflect the intersection of supply and demand. High prices spur production, while low prices drive consumption and discourage new entrants. When supply outstrips demand, surplus goods accumulate; conversely, when demand outpaces supply, shortages arise. Such inefficiencies highlight the delicate balance markets naturally strive to achieve, where prices adjust to "clear" the market, ensuring goods are allocated effectively. Government interventions that set prices too high create surpluses, as seen historically in the agricultural sector, where surplus commodities like cheese filled government warehouses. Meanwhile, fixing prices too low causes shortages, as evidenced in newly independent African nations that artificially reduced food prices, driving farmers out of business and exacerbating food scarcity. #### Market Prices and Price Fixing Failures Price fixing disrupts the natural feedback loop of supply and demand. When governments or businesses artificially alter prices, they prevent the market from functioning efficiently. Setting prices higher than the market equilibrium results in unsold goods—surplus—which eventually leads to wasted resources. Conversely, artificially low prices lead to shortages as production decreases while consumer demand rises beyond supply capacity. Historically, wage and price controls, such as those implemented by Nixon in the 1970s, resulted in gasoline shortages and other market inefficiencies. The eventual deregulation under President Reagan demonstrated how the removal of price controls can restore market balance, as oil prices fell and supply stabilized without government intervention. #### Inflation and Interest Rate Manipulation Interest rates represent the price of borrowing money, a price set by market forces in a healthy economy. Central banks, such as the Federal Reserve, manipulate interest rates as part of monetary policy, often keeping them artificially low to stimulate borrowing during recessions. However, such policies can backfire. By maintaining near-zero interest rates for extended periods, as seen post-2008, central banks discourage lending while failing to significantly stimulate economic growth. Japan’s prolonged experiment with zero interest rates offers a cautionary tale. Since the 1990s, the Bank of Japan has held rates near zero, yet the economy has remained stagnant, proving that prolonged low rates do not necessarily lead to sustained growth. Similarly, despite quantitative easing and low rates in the U.S. and Europe, economic recovery has been slow and uneven, suggesting that market-driven interest rates might allocate capital more efficiently than central bank interventions. #### Conclusion: Free Markets Versus Price Fixing Price fixing, whether by government or businesses, disrupts the equilibrium of supply and demand. Market prices emerge from the interaction between buyers and sellers, reflecting true supply and demand conditions. Artificially manipulating these prices leads to inefficiencies, shortages, and surpluses. Historical evidence—from agricultural surpluses to gasoline shortages—demonstrates the long-term harms of such interventions. Furthermore, prolonged manipulation of interest rates by central banks hinders the natural allocation of capital, creating conditions that stifle economic growth rather than promote it. A market-based approach, where prices—including the price of money—are allowed to adjust freely, remains the most effective means of fostering economic stability and growth.