You would think it should be common sense.

If prices are arbitrarily set too low, more people will want to but the product or service and fewer will want to produce it, and a shortage results.  If prices are set arbitrarily too high,more people will want to produce the product or service, but fewer will want to buy it, resulting in a glut.

One only has to reflect on the recent stories from Venezuela where, among other staple goods, there is a shortage of toilet paper.  Why?  Because the government has controlled the price, setting it arbitrarily low which increases demand while at the same time reducing supply.  As the Transitions blog at Foreign Policy puts it:

The Venezuelan economic model of excessive meddling is creating a mess. By keeping prices artificially low and imposing price controls on everything, they’re completely undermining the domestic economy to gain short lived political payoffs. Black markets occur when the formal economy isn’t functioning — and it hasn’t been for a while. Just between April and May, prices shot up an astonishing 6.1 percent.

Apparently the city council members in Washington D.C. don’t understand this basic economic fact and have decided to impose a higher minimum wage of $12.50.  Well, not on everyone.  The way the law is written essentially applies it to just one company – Wal-Mart.  So not only is this policy economically foolish and a rights violation in and of itself (as all minimum wage laws are), but it also is likely unconstitutional as it is not applied equally to all businesses.

One day, hopefully, basic economic theory will be a requirement before someone could actually get elected to a position where they can be making economic policy.  I can dream.

The Voices of Reason and Observations on Life in America blogs have good takes on the Wal-Mart story.

Here is a short video from Thomas Sowell on the effect of price controls in genera:

And one from Yaron Brook on minimum wage laws in particular: