Price controls always lead to shortages. When government limits the prices companies can charge for products and services, fewer companies participate in the marketplace and consumers end up scrambling to find what they need. “We economists don’t know much, but we do know how to create a shortage,” said Nobel laureate economist Milton Friedman. Well, California politicians – and voters – also know how to create a shortage. The latest example involves the state’s insurance market. In 1988 voters approved Proposition 103, which gave the insurance commissioner the power to approve insurance rate increases and even to roll back rates. It’s a price control, although the measure provided some workarounds. Currently, California is facing an insurance crisis. After losses from wildfires, major property insurers have stopped writing new policies, are non-renewing policy holders and even pulling out of the state altogether. This crisis may be coming to the auto market as car-repair costs have soared. Insurance Commissioner Ricardo Lara has acted too slowly, but his plan gets the fundamentals right. It would speed up the rate-review process and allow insurers to increase rates based on rising reinsurance costs. Reinsurance is the insurance that insurance companies buy and enables them to offer more policies without risking their financial reserves. Related Articles Editorials | Schools search for post-COVID learning gains Editorials | Gavin Newsom the drug warrior Editorials | Gov. Newsom addicted to signing bad internet laws Editorials | Endorsement: No on Proposition 6. There’s nothing wrong with requiring prisoners to work. Editorials | Endorsement: No on San Bernardino County Measure L Lara has been explaining the reforms in public meetings. During a recent hearing in Los Angeles, the author of Prop. 103 and founder of a consumer group blasted Lara for caving in to the demands of insurance companies and for undermining the rate-limiting proposition, per a report in The Orange County Register. Frustrated homeowners also gave the commissioner an earful. We understand why property owners, who can’t find policies or face unaffordable rates from a dwindling number of insurers, are upset. But government-imposed low prices don’t help if there’s no one left to offer the policies. Prices need to rise to market rates. Then, as Lara said, “we (will) have insurance companies running back in every corner of the state.” It’s tough medicine, for sure, but this is what happens after the government creates a shortage.