4 ms·

Price controls have never worked, and never will work, because they cannot work.

tombert 5y ago
Sorry, do you have a citation for this? I know price controls are generally not liked by economists but I don't know that any have said flatout that they will never work.
- kajecounterhack 5y ago
  +1 in fact there are situations that definitely call for price controls. For example wartime price ceilings to prevent gouging. Or COVID vaccine pricing. Price controls work in these cases if companies have some reason (e.g. governmental mandate) to not seek the highest price. Successful deployment of price controls just have to come with a host of other policies to mitigate downsides. For example, if you enact a price ceiling, you get shortages. You deal with it by employing things like triaged distribution (e.g. early COVID vaccines go to medical professionals, N95 masks go to hospitals, etc, gas gets rationed with much of it going to the military in wartime).
  - cryptonector 5y ago
    Wartime price controls don't help the consumer -- they help the government keep the consumer from consuming goods and services needed for the war effort, and they do so by discouraging consumption. There is always a sense in which price controls work. It's just never the actual publicly ostensible sense. Prices are too high! -consumers Ok, we'll set a price ceiling -government Yayayayay! -consumers Hey wait a minute! Supply has vanished! -consumers <crickets> -government
    - kajecounterhack 5y ago
      You before this comment: > Price controls have never worked, and never will work, because they cannot work. You after this comment: > There is always a sense in which price controls work. That's all I was trying to get at. We agree they work. If you know what effects they're going to have, and they match your intentions, then they work. If you know the general populace will have a shortage of N95 masks but hospital workers will be getting every mask produced in the country at a reasonable price, then it works. If your state has a cold snap and your citizens don't see $100k bills for a few hours of power (even though many folks will experience blackouts), then it works. FWIW black and white statements like "price controls never work" ring of a certain "rah-rah unfettered capitalism is always the answer" mentality that lacks nuance. Just because you've taken some macroeconomic classes doesn't mean that how things work is all that simple.
      - cryptonector 5y ago
        It's no contradiction. Price controls do not work for the purpose that is generally given for them. The stated purpose is generally to reduce prices seen by consumers, or to subsidize producers of some particular good/service. It's extremely rare that the stated purpose is "to stop consumption of the product in question"!
        kajecounterhack 5y ago
        > Price controls do not work for the purpose that is generally given for them. > stated purpose is generally to reduce prices seen by consumers, or to subsidize producers of some particular good/service I thought I gave examples that fell outside of this? * Wartime/Emergency: stated purpose is to shift supply toward military/medical uses. Shortages and black markets are acceptable negative side effects. * Energy: protect citizens from gouging in time of crisis. Lack of price controls did not prevent blackouts to Texans in the US last year. It did cause many folks to be saddled with insane bills. You can also implement rationing to further mitigate imbalances. So price may be low, but you can only buy 1 per day, or something like that.
        cryptonector 5y ago
        > You can also implement rationing to further mitigate imbalances. So price may be low, but you can only buy 1 per day, or something like that. Generally it goes the other way around. First government imposes price controls, which cause scarcity. Then they impose rationing. > Lack of price controls did not prevent blackouts to Texans in the US last year. It did cause many folks to be saddled with insane bills. Price controls are not the only way you get to end up with limited supply, that's true, and that situation was temporary, also true, and there was no rationing (some areas did not lose power because they were "privileged") while all others did lose power. The people who were "saddled with insane bills" were those who had a specialty spot-price utility. > Wartime/Emergency: stated purpose is to shift supply toward military/medical uses. Shortages and black markets are acceptable negative side effects. I acknowledge the wartime thing, but that is quite exceptional. We've had lots of price controls during peace time here and all over the world, and they have never worked for their ostensible reasons. When was the last time we had wartime price controls in the U.S.? Not since WWII.
- cryptonector 5y ago
  > Sorry, do you have a citation for this? How about every standard economics class you can find at a reasonable school? This is covered in high school and university economics courses. Oh, it's not usually stated as "price controls don't work", but it's covered. It's quite simple: forcing the price of some good while allowing supply and demand to adjust accordingly necessarily causes them to adjust accordingly. Set prices too low and supply shrivels, leading to shortages. Set prices too high and demand falls off and searches for substitutes. The ostensible goal of price controls is always just that: to set the price of some good so as to alleviate the burden on some class of people (either the producers or the consumers, depending on whether the price is set too high or too low). The actual goal of price controls, if it's anything other than propaganda value ("look! we care about you! we're doing something you want!"), does get met. So in that sense price controls may work, of course, if the target of the propaganda is too dumb to understand they've been had or if they have no way to reject proposed price controls. But that's not the sense people want -- every consumer wants lower prices, and every producer wants bigger profits (which often, but not always, means higher prices). All that said, you can make price controls work. Like, if you enslave some people (generally that would be producers, when you want to set an artificially low price on some good or service). Or maybe if automation reaches such levels that marginal costs are zero for most goods in most goods baskets -- I'm not sure if this has been studied.
  - tombert 5y ago
    I took high school and university economics, and they talked about rent controls and a few other price controls, and I agree that generally they probably aren't a good idea, but they never said that they could never work in those classes. Maybe I just went to a shitty school (Florida State University) but it wasn't a diploma mill or anything. That said, your big rant isn't a citation, and saying "LOL IT'S IN YOUR HIGH SCHOOL CLASS YOU GOOFBALL" doesn't really count. I'm looking for one prominent economist that has stated the price controls can never work.
  - edmundsauto 5y ago
    Why do manufacturers sometimes set retail pricing, aren’t those price controls? AIUI, some products have minimum contractual prices that retailers have to sell for. I’m not an economist, and I tend to see economics “laws” more akin to social science than physics. Ie, economists describe plausible mechanisms and principles, but they are not very useful to make predictions.
s1artibartfast 5y ago
They absolutely work, but they just have significant costs and drawbacks.
- cryptonector 5y ago
  Oh, for some value of $work that doesn't involve their ostensible reason, yes.
  - marcosdumay 5y ago
    During a shock, when there exists sufficient productive capacity, price control together with forced production (as on fines for stopping it or worse) do really work. For obvious reasons (and very good ones), this is something people won't accept unless the shock is really serious, like a war. Anyway, there isn't sufficient productive capacity either, so the shock importance is a moot point.
    - cryptonector 5y ago
      > together with forced production a.k.a. slavery > For obvious reasons (and very good ones), this is something people won't accept unless the shock is really serious, like a war. No kidding. But again, it depends on what the goal of the price control is. In a war the goal is not to make life easier for the consumer -- the goal in that case is to get the consumer to stop consuming what the war machine needs for itself.
      - marcosdumay 5y ago
        > a.k.a. slavery On the case of war, conscription. It's disturbingly similar, but it's different. In peace times it's usually on the lines of "keep producing or your business will be closed", what is not that similar as the working people are not the ones facing the ultimatum (if it's ever done to a small company, then yes, it's like slavery). > In a war the goal is not to make life easier for the consumer -- the goal in that case is to get the consumer to stop consuming what the war machine needs for itself. Economies are large complicated beasts that move all kinds of products. When governments intervene, they do it in more than one way and with more than one goal. Price fixing also goes with rationing so that the population stays fed.
bwestergard 5y ago
Person who has never taken an econ course: "Price controls are great!" Person who has taken an undergraduate econ course only: "Price controls are terrible!" Mathematical economists: "Price controls are bad by definition, under highly restrictive assumptions about human welfare." Economists who study the actual history of price controls: "It varies and depends." Regarding the last view, Isabella Weber has done some interesting work: https://twitter.com/IsabellaMWeber https://twitter.com/IsabellaMWeber

Sorry, do you have a citation for this? I know price controls are generally not liked by economists but I don't know that any have said flatout that they will never work.

kajecounterhack 5y ago
+1 in fact there are situations that definitely call for price controls. For example wartime price ceilings to prevent gouging. Or COVID vaccine pricing. Price controls work in these cases if companies have some reason (e.g. governmental mandate) to not seek the highest price. Successful deployment of price controls just have to come with a host of other policies to mitigate downsides. For example, if you enact a price ceiling, you get shortages. You deal with it by employing things like triaged distribution (e.g. early COVID vaccines go to medical professionals, N95 masks go to hospitals, etc, gas gets rationed with much of it going to the military in wartime).
- cryptonector 5y ago
  Wartime price controls don't help the consumer -- they help the government keep the consumer from consuming goods and services needed for the war effort, and they do so by discouraging consumption. There is always a sense in which price controls work. It's just never the actual publicly ostensible sense. Prices are too high! -consumers Ok, we'll set a price ceiling -government Yayayayay! -consumers Hey wait a minute! Supply has vanished! -consumers <crickets> -government
  - kajecounterhack 5y ago
    You before this comment: > Price controls have never worked, and never will work, because they cannot work. You after this comment: > There is always a sense in which price controls work. That's all I was trying to get at. We agree they work. If you know what effects they're going to have, and they match your intentions, then they work. If you know the general populace will have a shortage of N95 masks but hospital workers will be getting every mask produced in the country at a reasonable price, then it works. If your state has a cold snap and your citizens don't see $100k bills for a few hours of power (even though many folks will experience blackouts), then it works. FWIW black and white statements like "price controls never work" ring of a certain "rah-rah unfettered capitalism is always the answer" mentality that lacks nuance. Just because you've taken some macroeconomic classes doesn't mean that how things work is all that simple.
    - cryptonector 5y ago
      It's no contradiction. Price controls do not work for the purpose that is generally given for them. The stated purpose is generally to reduce prices seen by consumers, or to subsidize producers of some particular good/service. It's extremely rare that the stated purpose is "to stop consumption of the product in question"!
      - kajecounterhack 5y ago
        > Price controls do not work for the purpose that is generally given for them. > stated purpose is generally to reduce prices seen by consumers, or to subsidize producers of some particular good/service I thought I gave examples that fell outside of this? * Wartime/Emergency: stated purpose is to shift supply toward military/medical uses. Shortages and black markets are acceptable negative side effects. * Energy: protect citizens from gouging in time of crisis. Lack of price controls did not prevent blackouts to Texans in the US last year. It did cause many folks to be saddled with insane bills. You can also implement rationing to further mitigate imbalances. So price may be low, but you can only buy 1 per day, or something like that.
        cryptonector 5y ago
        > You can also implement rationing to further mitigate imbalances. So price may be low, but you can only buy 1 per day, or something like that. Generally it goes the other way around. First government imposes price controls, which cause scarcity. Then they impose rationing. > Lack of price controls did not prevent blackouts to Texans in the US last year. It did cause many folks to be saddled with insane bills. Price controls are not the only way you get to end up with limited supply, that's true, and that situation was temporary, also true, and there was no rationing (some areas did not lose power because they were "privileged") while all others did lose power. The people who were "saddled with insane bills" were those who had a specialty spot-price utility. > Wartime/Emergency: stated purpose is to shift supply toward military/medical uses. Shortages and black markets are acceptable negative side effects. I acknowledge the wartime thing, but that is quite exceptional. We've had lots of price controls during peace time here and all over the world, and they have never worked for their ostensible reasons. When was the last time we had wartime price controls in the U.S.? Not since WWII.
cryptonector 5y ago
> Sorry, do you have a citation for this? How about every standard economics class you can find at a reasonable school? This is covered in high school and university economics courses. Oh, it's not usually stated as "price controls don't work", but it's covered. It's quite simple: forcing the price of some good while allowing supply and demand to adjust accordingly necessarily causes them to adjust accordingly. Set prices too low and supply shrivels, leading to shortages. Set prices too high and demand falls off and searches for substitutes. The ostensible goal of price controls is always just that: to set the price of some good so as to alleviate the burden on some class of people (either the producers or the consumers, depending on whether the price is set too high or too low). The actual goal of price controls, if it's anything other than propaganda value ("look! we care about you! we're doing something you want!"), does get met. So in that sense price controls may work, of course, if the target of the propaganda is too dumb to understand they've been had or if they have no way to reject proposed price controls. But that's not the sense people want -- every consumer wants lower prices, and every producer wants bigger profits (which often, but not always, means higher prices). All that said, you can make price controls work. Like, if you enslave some people (generally that would be producers, when you want to set an artificially low price on some good or service). Or maybe if automation reaches such levels that marginal costs are zero for most goods in most goods baskets -- I'm not sure if this has been studied.
- tombert 5y ago
  I took high school and university economics, and they talked about rent controls and a few other price controls, and I agree that generally they probably aren't a good idea, but they never said that they could never work in those classes. Maybe I just went to a shitty school (Florida State University) but it wasn't a diploma mill or anything. That said, your big rant isn't a citation, and saying "LOL IT'S IN YOUR HIGH SCHOOL CLASS YOU GOOFBALL" doesn't really count. I'm looking for one prominent economist that has stated the price controls can never work.
- edmundsauto 5y ago
  Why do manufacturers sometimes set retail pricing, aren’t those price controls? AIUI, some products have minimum contractual prices that retailers have to sell for. I’m not an economist, and I tend to see economics “laws” more akin to social science than physics. Ie, economists describe plausible mechanisms and principles, but they are not very useful to make predictions.

s1artibartfast 5y ago

They absolutely work, but they just have significant costs and drawbacks.

cryptonector 5y ago
Oh, for some value of $work that doesn't involve their ostensible reason, yes.
- marcosdumay 5y ago
  During a shock, when there exists sufficient productive capacity, price control together with forced production (as on fines for stopping it or worse) do really work. For obvious reasons (and very good ones), this is something people won't accept unless the shock is really serious, like a war. Anyway, there isn't sufficient productive capacity either, so the shock importance is a moot point.
  - cryptonector 5y ago
    > together with forced production a.k.a. slavery > For obvious reasons (and very good ones), this is something people won't accept unless the shock is really serious, like a war. No kidding. But again, it depends on what the goal of the price control is. In a war the goal is not to make life easier for the consumer -- the goal in that case is to get the consumer to stop consuming what the war machine needs for itself.
    - marcosdumay 5y ago
      > a.k.a. slavery On the case of war, conscription. It's disturbingly similar, but it's different. In peace times it's usually on the lines of "keep producing or your business will be closed", what is not that similar as the working people are not the ones facing the ultimatum (if it's ever done to a small company, then yes, it's like slavery). > In a war the goal is not to make life easier for the consumer -- the goal in that case is to get the consumer to stop consuming what the war machine needs for itself. Economies are large complicated beasts that move all kinds of products. When governments intervene, they do it in more than one way and with more than one goal. Price fixing also goes with rationing so that the population stays fed.

bwestergard 5y ago

Person who has never taken an econ course: "Price controls are great!" Person who has taken an undergraduate econ course only: "Price controls are terrible!" Mathematical economists: "Price controls are bad by definition, under highly restrictive assumptions about human welfare." Economists who study the actual history of price controls: "It varies and depends." Regarding the last view, Isabella Weber has done some interesting work: https://twitter.com/IsabellaMWeber https://twitter.com/IsabellaMWeber