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Hm, I think neoliberals and commies are uniformly distributed on HN. I think the downvoting comes from that everybody who blames Chavez or the capitalists witho

Hm, I think neoliberals and commies are uniformly distributed on HN. I think the downvoting comes from that everybody who blames Chavez or the capitalists without mentioning stupidity just uses the Venezuela case for pushing his right or left agenda. Where on the world did price control ever work?

rbanffy 11y ago
> Where on the world did price control ever work? Was it ever applied isolated from other factors?
- ktRolster 11y ago
  There's a lot of empirical evidence that price controls cause shortages, and the theory behind it is well understood. Wikipedia has a few examples, dating back to the Roman period: https://en.wikipedia.org/wiki/Price_controls#Criticisms https://en.wikipedia.org/wiki/Price_controls#Criticisms There are a lot of things economists don't know, but price controls -> shortages is one of the things that is well established (the exception is when the price limit is higher than the price of the object, and thus has no effect).
  - burfog 11y ago
    I think another exception would be when price controls are used only to stop monopoly rent. (or part of the same exception, depending on what you mean by "price of the object")
    - youngButEager 11y ago
      No. Rent control does lead to shortages. I have about $6 million to invest in rental properties. San Francisco is not being considered. I'm actually liquidating all my California assets, as the INCENTIVE to operate rentals has been destroyed. Have a read of this: "Due to Rent Control, S.F. Has 31,000 Vacant Housing Units As Frustrated Landlords Give Up" The Bay Citizen -- "In San Francisco, one of the toughest places in the country to find a place to live, more than 31,000 housing units — one of every 12 — now sit vacant, according to recently released census data. That’s the highest vacancy rate in the region, and a 70 percent increase from a decade ago." The reason? The city's pro-tenant, outdated rent control laws that make it difficult to raise rents or evict a tenant. "Increasingly, small-time landlords are just giving up, like one who has left two large apartments on the second and third floors of her building vacant for more than a decade, after a series of tenant difficulties. It’s just not worth the bother, or the risk, of being legally tied to a tenant for decades. “Vacancy rates are going up because owners have decided to take their units off the market,” said Ross Mirkarimi, a progressive member of the Board of Supervisors. He attributes that response to “peaking frustrations in dealing with the range of laws that protect tenants in San Francisco that make it difficult for small property owners to thrive.” Perversely, that is hurting the city’s renters as well, as a large percentage of the city’s housing stock is allowed to just sit vacant, driving up rents that newcomers pay for market-rate housing." MP: As we know from basic economic theory, rent control laws are doomed to fail with many predictable unintended consequences in the long run: fewer new rental units are built or made available, many apartments are removed from the market, a decline in the quality of housing, lower rental rates for long-term tenants but much higher rents for new tenants, inefficient use of housing space, etc. In other words, rent control laws guarantee that there will be less affordable housing in the long run, not more. PRICE CONTROLS CAUSE SHORTAGES. When there is no incentive to produce a good or a service, 2 things happen: 1) the SUPPLY of the good or service will drop (no incentive to produce) 2) if the DEMAND stays the same or goes HIGHER (San Francisco demand for rental units) -- the price will go up for the reduced SUPPLY of the good or service. That's why SF has high rents. Huge demand. No investment in affordable rentals. ZERO. Thus, SUPER HIGH rents. Same in NYC. - See more at: http://mjperry.blogspot.com/2011/05/because-of-rent-control-sf-has-31000.html#sthash.tva6Hdad.dpuf http://mjperry.blogspot.com/2011/05/because-of-rent-control-...
      - deleted 11y ago
        [deleted]
      - rbanffy 11y ago
        > "Due to Rent Control, S.F. Has 31,000 Vacant Housing Units As Frustrated Landlords Give Up" Maybe this can be fixed by introducing the radical idea that artificial shortages created by greedy owners who want to drive prices up but can't is wrong and should be punished.
      - burfog 11y ago
        Your example does not apply. You don't get monopoly rent. Without price control, your local utilities could extract monopoly rent. Pay up, or you can't take a shower. Shortages happen only when the price control is extreme enough to push the price below the cost of supplying/rationing the product. If water costs $x per acre-foot to supply, and demand will cause the lake/river/well to run dry when the price drops below $y per acre-foot, but the monopoly makes the most profit selling at some much greater price $z, then the monopoly rent is $z-max($x,$y) and there will be no shortage if a cap greater than max($x,$y) is set.
- tobltobs 11y ago
  So you want to say that price controls could work, but until now they always have been applied in situations where for other factors the economy was doomed anyway?
  - PhantomGremlin 11y ago
    Exactly. It's just like communism. It always fails because of some implementation problems, not because the idea itself is idiotic.
    - toehead2000 11y ago
      Maybe if an idea can only be implemented idiotically, it is an idiotic idea?
- ctdonath 11y ago
  Ah, the "spherical chicken" argument. Something has to limit demand, as there is not unlimited supply. If prices are not allowed to rise to where demand slows (to a fair and equal exchange of value), and nothing else increase the cost of acquisition (awaiting queues, covenants/agreements, paperwork, background checks, etc), then the only way to limit demand on a limited supply is simply running out of supply. Price controls don't work. They may not completely destroy the supply, but they will at least debilitate it, functioning in a way many come to accept as normal - not realizing the resulting damage.
  - slantaclaus 11y ago
    Upvoted after reading first sentence because "spherical chicken argument"
nhaehnle 11y ago
Price controls are fairly widely spread, actually. Some examples that come to mind immediately: taxis in most countries, fees of medical doctors, lawyers, and some other professionals (e.g. real estate agents) in Germany and probably many other countries. Prices must be set somehow, and there are many markets where setting them via regulation is a good thing. Taxis are a perfect example: since they're often used by travellers who are unfamiliar with a city, having a clear system determining the price is beneficial. I think it's important to keep those examples of (mostly) beneficial price controls in mind, since obviously the examples where price controls fail spectacularly are more salient, and hence there may be a misleading bias in how price controls are perceived.
- tobltobs 11y ago
  Maybe i should had have added that I mean price control for products, not for services.
- riffraff 11y ago
  there is a difference between prices controlled in the interest of the the buyer or the seller. For example, in many countries, professional lobbies (lawyers, doctors) influence their set price to what they deem "fair" which means it's in their interest as providers. This is different from the government setting a maximum price on soap and milk, which is in the interest of the buyer but not the seller. Taxis are special again, as they often exist in a state of government-controlled monopoly (i.e. taxi licenses are restricted).

rbanffy 11y ago

> Where on the world did price control ever work? Was it ever applied isolated from other factors?

ktRolster 11y ago
There's a lot of empirical evidence that price controls cause shortages, and the theory behind it is well understood. Wikipedia has a few examples, dating back to the Roman period: https://en.wikipedia.org/wiki/Price_controls#Criticisms https://en.wikipedia.org/wiki/Price_controls#Criticisms There are a lot of things economists don't know, but price controls -> shortages is one of the things that is well established (the exception is when the price limit is higher than the price of the object, and thus has no effect).
- burfog 11y ago
  I think another exception would be when price controls are used only to stop monopoly rent. (or part of the same exception, depending on what you mean by "price of the object")
  - youngButEager 11y ago
    No. Rent control does lead to shortages. I have about $6 million to invest in rental properties. San Francisco is not being considered. I'm actually liquidating all my California assets, as the INCENTIVE to operate rentals has been destroyed. Have a read of this: "Due to Rent Control, S.F. Has 31,000 Vacant Housing Units As Frustrated Landlords Give Up" The Bay Citizen -- "In San Francisco, one of the toughest places in the country to find a place to live, more than 31,000 housing units — one of every 12 — now sit vacant, according to recently released census data. That’s the highest vacancy rate in the region, and a 70 percent increase from a decade ago." The reason? The city's pro-tenant, outdated rent control laws that make it difficult to raise rents or evict a tenant. "Increasingly, small-time landlords are just giving up, like one who has left two large apartments on the second and third floors of her building vacant for more than a decade, after a series of tenant difficulties. It’s just not worth the bother, or the risk, of being legally tied to a tenant for decades. “Vacancy rates are going up because owners have decided to take their units off the market,” said Ross Mirkarimi, a progressive member of the Board of Supervisors. He attributes that response to “peaking frustrations in dealing with the range of laws that protect tenants in San Francisco that make it difficult for small property owners to thrive.” Perversely, that is hurting the city’s renters as well, as a large percentage of the city’s housing stock is allowed to just sit vacant, driving up rents that newcomers pay for market-rate housing." MP: As we know from basic economic theory, rent control laws are doomed to fail with many predictable unintended consequences in the long run: fewer new rental units are built or made available, many apartments are removed from the market, a decline in the quality of housing, lower rental rates for long-term tenants but much higher rents for new tenants, inefficient use of housing space, etc. In other words, rent control laws guarantee that there will be less affordable housing in the long run, not more. PRICE CONTROLS CAUSE SHORTAGES. When there is no incentive to produce a good or a service, 2 things happen: 1) the SUPPLY of the good or service will drop (no incentive to produce) 2) if the DEMAND stays the same or goes HIGHER (San Francisco demand for rental units) -- the price will go up for the reduced SUPPLY of the good or service. That's why SF has high rents. Huge demand. No investment in affordable rentals. ZERO. Thus, SUPER HIGH rents. Same in NYC. - See more at: http://mjperry.blogspot.com/2011/05/because-of-rent-control-sf-has-31000.html#sthash.tva6Hdad.dpuf http://mjperry.blogspot.com/2011/05/because-of-rent-control-...
    - deleted 11y ago
      [deleted]
    - rbanffy 11y ago
      > "Due to Rent Control, S.F. Has 31,000 Vacant Housing Units As Frustrated Landlords Give Up" Maybe this can be fixed by introducing the radical idea that artificial shortages created by greedy owners who want to drive prices up but can't is wrong and should be punished.
    - burfog 11y ago
      Your example does not apply. You don't get monopoly rent. Without price control, your local utilities could extract monopoly rent. Pay up, or you can't take a shower. Shortages happen only when the price control is extreme enough to push the price below the cost of supplying/rationing the product. If water costs $x per acre-foot to supply, and demand will cause the lake/river/well to run dry when the price drops below $y per acre-foot, but the monopoly makes the most profit selling at some much greater price $z, then the monopoly rent is $z-max($x,$y) and there will be no shortage if a cap greater than max($x,$y) is set.
tobltobs 11y ago
So you want to say that price controls could work, but until now they always have been applied in situations where for other factors the economy was doomed anyway?
- PhantomGremlin 11y ago
  Exactly. It's just like communism. It always fails because of some implementation problems, not because the idea itself is idiotic.
  - toehead2000 11y ago
    Maybe if an idea can only be implemented idiotically, it is an idiotic idea?
ctdonath 11y ago
Ah, the "spherical chicken" argument. Something has to limit demand, as there is not unlimited supply. If prices are not allowed to rise to where demand slows (to a fair and equal exchange of value), and nothing else increase the cost of acquisition (awaiting queues, covenants/agreements, paperwork, background checks, etc), then the only way to limit demand on a limited supply is simply running out of supply. Price controls don't work. They may not completely destroy the supply, but they will at least debilitate it, functioning in a way many come to accept as normal - not realizing the resulting damage.
- slantaclaus 11y ago
  Upvoted after reading first sentence because "spherical chicken argument"

nhaehnle 11y ago

Price controls are fairly widely spread, actually. Some examples that come to mind immediately: taxis in most countries, fees of medical doctors, lawyers, and some other professionals (e.g. real estate agents) in Germany and probably many other countries. Prices must be set somehow, and there are many markets where setting them via regulation is a good thing. Taxis are a perfect example: since they're often used by travellers who are unfamiliar with a city, having a clear system determining the price is beneficial. I think it's important to keep those examples of (mostly) beneficial price controls in mind, since obviously the examples where price controls fail spectacularly are more salient, and hence there may be a misleading bias in how price controls are perceived.

tobltobs 11y ago
Maybe i should had have added that I mean price control for products, not for services.
riffraff 11y ago
there is a difference between prices controlled in the interest of the the buyer or the seller. For example, in many countries, professional lobbies (lawyers, doctors) influence their set price to what they deem "fair" which means it's in their interest as providers. This is different from the government setting a maximum price on soap and milk, which is in the interest of the buyer but not the seller. Taxis are special again, as they often exist in a state of government-controlled monopoly (i.e. taxi licenses are restricted).