Today's Mises Daily, by Peter C. Earle, aims to compare the economic policies advocated by Paul Krugman with the disastrous decisions made by Roman emperor Diocletian. I'm not a huge Krugman fan, but I must say that Earle is straining credibility somewhat with his comparison.
The historical aspects of the article are interesting, chronicling the circumstances which led to hyper-inflation and a series of ill-fated price controls in the Roman Empire. Laws were passed restricting prices of over 900 commodities and wages for 130 occupations.
...the Romans learned a lesson that wouldn't be repeated again for almost 1600 years: that attempting to control inflation through price controls is like attempting to control obesity by wearing tight clothing: the results are generally frustrating, often painful, and sometimes deeply embarrassing.It's a neat debating tactic to pass off your crucial assumptions as uncontroversial. I bolded the part of the quote I'm referencing.
To Krugman, again: while it is true that he has not, as yet, advocated for a capping of consumer or capital-goods prices, he has vociferously defended the existence of central banks and endorsed their mission to set the price of money via interest-rate targeting, which is tantamount to fixing prices across the entire economy in a singular monetary contrivance.
Earle thinks that monetary injections are non-neutral, that is, they affect relative prices in the economy. This is a point of serious contention between Austrians and Monetarists, the latter camp believing that monetary injections are largely neutral. Personally, I think the Austrians are ahead on this point, but it's inaccurate to portray this as a closed issue.
Also, even if we accept that injections affect relative prices, that is not the same as a widespread campaign of coercive price fixing by the state.
Austrian capital-based macroeconomics says that monetary injections to lower the interest rate will impact goods depending on what stage of production they are in; the lower interest rate tends to favor long-term purchases (e.g. housing) over immediate consumption. That disrupts the structure of economic production over time.
Price ceilings are different than monetary injections. A price ceiling will cause shortages of the good in question, which is largely why they are so damaging to the economy. Monetary injections just push the interest rate down, helping borrowers and hurting savers. A shortage of savings is created, but it is covered up (at least in the short-term) by the injections. This can distort the structure of investment but the mechanism is very different from other forms of price fixing, and to treat them as all the same is overly reductive.
The price mechanism can still function to a large extent even under activist monetary policy. Distortions occur, but they are not nearly on the same scale of magnitude as those from overt price caps. Earle, in his attempt to indict Krugman and support Paul, pushes the historical analogy past its breaking point.
There are plenty of over avenues along which Paul Krugman's views can be criticized, but a historical argument relying on such tenuous assumptions will probably only convince those who are true believers already.