You may be one of the millions of summertime travelers who bite your lip every time you fill up your tank to the tune of $3 or more a gallon.

As you watch the cost of your fill-up swell, you might be thinking, “Somebody’s got to put a ceiling on these prices.” It’s a common reaction when prices seem to inflate beyond reason. But consumers should always beware whenever they hear policymakers utter the words “price controls” or “price negotiations.” No matter what the resource – whether it’s gasoline or prescription drugs – price caps always bear harsh unintended consequences.

Just ask the citizens of Hawaii. Last September, their elected representatives thought they could circumvent the economic laws of supply and demand. They imposed price controls (a so-called “gas cap”) on the wholesale price of gasoline.

It didn’t work. When the price of a resource is artificially forced below its market value, everyone wants in on the good deal. Suppliers, though, have less of an incentive to sell. So shortages developed at the wholesale level, as any microeconomics 101 professor could have predicted. These shortages caused prices at the pump to rise, not fall, as consumers desperate for more scarce gas bid the price through the roof.

The failure wasn’t just one of “regulatory technique.” Had Hawaii’s legislature tried to impose the “gas cap” at the pump rather that at the wholesale level, the Aloha State soon would have resembled the old Soviet Union with gasoline priced well below market-clearing levels and not a drop of gasoline to be had at any pump on the islands.

It’s an ironclad law: Impose artificial caps on market prices and demand rises while supply falls, leading to shortages. Either retailers sell out or the government steps in to “correct” the problem and compounds its original mistake – in the name of “fairness,” of course – by trying to ration the product.

Give Hawaii’s legislators credit; they didn’t make the mistake of rationing. They saw the error of their ways and repealed the gas cap less than a year after they enacted it. But their ill-considered intervention into the marketplace was costly while it lasted. A study released in February by Hawaii’s Department of Business, Economic Development, and Tourism found this short experiment in price controls cost consumers as much as $55 million in higher prices and regulatory costs in less than six months.

The historical record is clear: Price controls always have the opposite of their intended effects.

Airfares were higher, not lower, after price controls were imposed in 1938. When caps were finally removed from the airline industry 25 years ago, prices fell dramatically.

Price controls imposed to stop skyrocketing inflation during the 1970s also were spectacularly unsuccessful. When President Reagan removed price controls on gasoline, long gas lines evaporated and the price of gasoline fell sharply.

Even the prospect of price controls creates havoc.

In 1993, President Clinton proposed that the federal government set prices for new “breakthrough” drugs. Almost immediately, research and development activity in the pharmaceutical industry plummeted.

In the dozen years preceding the introduction of Mr. Clinton’s plan, the research and development budget of drug companies averaged about 11% a year, never falling below 7%. Then suddenly, in 1994 and 1995, research and development budgets fell to 3% percent and 4% percent respectively as the health care debate dragged on.

Only in 1996 – after Congress rejected Hillary Care – did pharmaceutical research and development in new drugs rebound to the 11% range, where it has remained ever since.

Medicaid is another great example of how price controls backfire. According to the Government Accountability Office, a 1990 law requiring pharmaceutical firms to grant a 15% discount for Medicaid purchases ended up raising managed care prices.

Sadly, policymakers seem intent on defying the lessons of economic history. The House Minority Leader, Nancy Pelosi, recently announced her intent to strip free-market pricing from the new Medicare drug benefit. Well aware of the bad karma associated with the term “price controls,” she instead invoked a new term for government-set prices: “price negotiations.”

In the pharmaceutical arena, price controls or “negotiations” would create huge disincentives for companies to develop new life-saving drugs. Not only would price caps curtail overall research, they would divert it into less risky and less promising areas – particularly with regard to seniors.

If drugs that are primarily used by seniors suddenly are made unprofitable by federal decree, the drug industry would lose all incentive to develop cures for diseases – such as Alzheimer’s – that afflict the elderly.

The end result would be a stealth form of drug rationing, just like we’ve seen with gas price caps. Low prices don’t do anyone any good if the product isn’t actually available.

So next time you’re cursing the price of gas, your prescriptions, or anything else, be careful for what you wish. Someone in Washington might be listening.

Mr. Hunter is the former staff director of the congressional Joint Economic Committee. He currently serves as a consultant to the pharmaceutical industry.