4 ms·

The surprising thing is the government makes no explicit effort to control prices. It does not ask or legislate for prices to not go up. What seems to be happ

The surprising thing is the government makes no explicit effort to control prices. It does not ask or legislate for prices to not go up. What seems to be happening in Australia is companies are taking the chance to pump their prices. Presumably this results in high profits. I guess there would be stats that should if profits have been going up during this period of inflation.

treeman79 3y ago
Read Basic Economics by Thomas Sowell. The only thing price controls do is cause shortages and long term price increases. If companies are able to raise prices for long periods and make large prophet, that means something is completely broken. Competition would bring in new people that offer the same goods or services at lower prices. Government regulations controls, etc stop that and interfere with natural markets. Russia had a long history of price controls, and it never worked well.
- vkou 3y ago
  You can solve price gouging from the other end. Instead of capping prices at the point of sale, tax profits. Right now, prices are growing, mostly due to an increase in profit margins. If the market is failing us, because it can't optimize those profit margins down, it's the government's job to take and redistribute that surplus.
- failuser 3y ago
  Do you also propose to stop interfering in the market by providing massive government subsidies to the farmers? True market economy tend to run away and blow, big players tend to consolidate and form monopolies, the thing we have not is a very complicated compromise between free market, regulations and unspoken traditions. Please stop pretending that these things are obvious and easy.
adventured 3y ago
It's not surprising. Price controls very commonly fail in horrific fashion. Many of the basketcase economies of the last 50 years have infamously tried such. Governments are not remotely equipped to manage price controls effectively (including needing to rapidly + correctly adjust to changes), and none have ever successfully managed blanket price controls well (there isn't a single modern economic record of that occurring in non-war time). There are only niche instances of price controls being effective (narrowly targeted, often either temporary or offset).
- HarryHirsch 3y ago
  On the other hand, price controls work remarkably well in medicine - look at medical costs in the European economies.
  - killingtime74 3y ago
    That's because the government is a monopoly on buying those services from the service providers (Don't get me wrong I am fully in support). If there is less than Monopoly control by the government price controls don't work.
    - npongratz 3y ago
      > That's because the government is a monopoly on buying those services from the service providers That's called a monopsony: https://www.investopedia.com/terms/m/monopsony.asp https://www.investopedia.com/terms/m/monopsony.asp "A single buyer dominates a monopsonized market while an individual seller controls a monopolized market."
    - chimeracoder 3y ago
      > That's because the government is a monopoly on buying those services from the service providers That's true in some markets, but not all.
  - Aunche 3y ago
    Pharmaceutical companies will continue to develop new drugs so long as Americans are willing to spend infinite money on them. If they can make a marginal profit on selling some to a European country, that's a nice bonus. If the US also implemented price controls, companies would have little incentive to fund the development of new drugs.
    - HarryHirsch 3y ago
      Offsetting R&D costs and directing R&D are a policy problem, and a completely different beast. The antibiotic resistance crisis is in front of us, yet the big returns are in cancer, with the additional wrinkle being that what is needed is new antibiotics of last resort. That's a problem of a kind that the market cannot solve. Also: generic shortages. Generics are a low-margin business with maybe 6 suppliers workdwide. If one facility goes off-line for this or that reason there's going to be a shortage, and slack capacity is punished by the market. Right now the cisplatin shortage is in the news, and again the market is no help.
asdff 3y ago
How much would a gallon of milk be without subsidies to the farmer and producer? $40?
- mullingitover 3y ago
  I think it's the other way around - without the government stabilizing the market with subsidies, dairy would be dirt cheap, then expensive, then cheap, then totally unavailable, etc. Edit/correction: actually, the USDA doesn't operate price floors anymore. "Eventually, the USDA decided it had had enough, ending the price support program in 2014."[1] [1] https://modernfarmer.com/2022/05/cheese-caves-missouri/ https://modernfarmer.com/2022/05/cheese-caves-missouri/
  - zeroonetwothree 3y ago
    The market has already come up with a solution for this--futures.
    - sokoloff 3y ago
      The contract size for milk future is 200K pounds, a little over 23K gallons, or about 500 years of my family's consumption. Futures are not a good answer for my use case as a dairy consumer.
      - nayuki 3y ago
        It's like you never heard of wholesalers vs. retailers. You're acting like your family has to buy milk by the tankerful or flour by the palletful. More examples from daily life: The electricity market, board lots vs. odd lots in stock trading, fractional shares, restaurant supply stores.
- doubled112 3y ago
  In Canada dairy farms throw out their over supply. There are quotas and they cannot exceed them. If that's not price fixing the other way, I don't know what it is. Like the comment next to mine says, it is likely to ensure stability.
deleted 3y ago
[deleted]
ACow_Adonis 3y ago
That's because the debate and popular press around all this discussion in Australia (and elsewhere) is a populist/political cluster fuck and has almost nothing to do with economics. Reserve bank doesn't want to talk about its roll in credit/ monetary expansion during the pandemic, gov doesn't want to talk about its policies to do the same and not wanting to address inflation through taxation or fiscal policy, business wants to pretend its not self interested and profit seeking, consumers don't want to admit that they might actually have to make some price-elastic decisions or change behaviours based on how much things cost, and everyone wants to pretend that we weren't responsible for fucking up housing over the last 20 years of policy or that there will be real repercussions from the boomers aging out. So instead we get economic discussion that looks more like the multiple spider-man pointing meme.
failuser 3y ago
Price controls are rarely the best option (there are price controls, e.g. utilities are highly regulated). But in general you should address the causes, not try to mess with the outputs. E.g. break down the monopolies. The only reason those were allowed to raise their head again was the promise of efficiency and lower prices. I think they forgot it.
CTDOCodebases 3y ago
They want inflation. How else are they suppose to get rid of all the debt they acquired during the pandemic and continue to meet ongoing demands? Look at the signs: - increased immigration during a housing crisis. - pay rises for the masses to push them into higher tax brackets. - slow gradual rate rises below inflation levels to avoid crashing the markets and to allow debtors to exit their positions without triggering a recession. They want inflation. In a high inflation environment the entities that win have income generating assets (in this case tax payers) and high levels of debt. The debt essentially gets inflated away.
- trog 3y ago
  Applying Hanlon's Razor here: I do not believe the Australian government wants inflation. I believe they are generally incompetent, not malevolent. They are too scared to do anything and risk losing the next election, despite the fact that they literally just won one, and they are too uncoordinated to do anything useful. It's easier to literally sit there and do nothing and put all the blame on the RBA and hope that it magically fixes itself somehow.
  - CTDOCodebases 3y ago
    It’s not malevolence though. It’s incentives. Therefore Hanlon’s Razor does not apply. The debt has to get paid somehow in order for the government to meet its ongoing financial obligations.
    - juve1996 3y ago
      Is Australia currently not meeting their debts or at risk in the short term future of not?
      - CTDOCodebases 3y ago
        You haven’t defined short term but I will say no. When I say ongoing obligations I am referring to welfare and Medicare. EDIT: Australian debt to GDP: https://tradingeconomics.com/australia/government-debt-to-gdp#:~:text=Government%20Debt%20to%20GDP%20in,percent%20of%20GDP%20in%202008 https://tradingeconomics.com/australia/government-debt-to-gd.... For a US perspective see below: https://uscmarshallweb.s3-us-west-2.amazonaws.com/assets/uploads/s1/files/keynote_speech_of_stan_druckenmiller_at_the_37th_usc_marshall_center_for_investment_studies_annual_meeting_may_1_2023_hdmqn6eb4m.pdf https://uscmarshallweb.s3-us-west-2.amazonaws.com/assets/upl...
ojbyrne 3y ago
As far as the US is concerned, nobody has good memories about the last time that was tried: https://www.cato.org/commentary/remembering-nixons-wage-price-controls https://www.cato.org/commentary/remembering-nixons-wage-pric...
fineIllregister 3y ago
I'll chime in because everyone is replying to complain about price controls. There is an alternative: windfall profit taxes. These have been proposed (by one political party) and blocked (by the other political party).
csomar 3y ago
> It does not ask or legislate for prices to not go up. Yeah, this worked very well for every country/government that tried this.
csense 3y ago
They tried price controls in the 1970's. It led to lines at gas stations, shortages, and rationing. Price controls are always either a no-op (if supply meets demand below the mandated price), or lead to shortages. For the good and simple reason that, if there's 100 units of X and people want 120 units, you have to have some algorithm to decide who doesn't get as much X as they want. With no price controls, businesses see X is selling quickly and raise the price (hopefully before the inventory hits zero all along the supply chain). Long-term, the high price encourages suppliers to produce more; the price provides a feedback signal that says "make more of this." With price controls, that doesn't happen. The product simply sells out because there's not enough to go around, and the 20 unlucky people who don't get their X are whoever happens to walk into the store when the shelves are empty, or are at the back of the line when a shipment comes in.

treeman79 3y ago

Read Basic Economics by Thomas Sowell. The only thing price controls do is cause shortages and long term price increases. If companies are able to raise prices for long periods and make large prophet, that means something is completely broken. Competition would bring in new people that offer the same goods or services at lower prices. Government regulations controls, etc stop that and interfere with natural markets. Russia had a long history of price controls, and it never worked well.

vkou 3y ago
You can solve price gouging from the other end. Instead of capping prices at the point of sale, tax profits. Right now, prices are growing, mostly due to an increase in profit margins. If the market is failing us, because it can't optimize those profit margins down, it's the government's job to take and redistribute that surplus.
failuser 3y ago
Do you also propose to stop interfering in the market by providing massive government subsidies to the farmers? True market economy tend to run away and blow, big players tend to consolidate and form monopolies, the thing we have not is a very complicated compromise between free market, regulations and unspoken traditions. Please stop pretending that these things are obvious and easy.

adventured 3y ago

It's not surprising. Price controls very commonly fail in horrific fashion. Many of the basketcase economies of the last 50 years have infamously tried such. Governments are not remotely equipped to manage price controls effectively (including needing to rapidly + correctly adjust to changes), and none have ever successfully managed blanket price controls well (there isn't a single modern economic record of that occurring in non-war time). There are only niche instances of price controls being effective (narrowly targeted, often either temporary or offset).

HarryHirsch 3y ago
On the other hand, price controls work remarkably well in medicine - look at medical costs in the European economies.
- killingtime74 3y ago
  That's because the government is a monopoly on buying those services from the service providers (Don't get me wrong I am fully in support). If there is less than Monopoly control by the government price controls don't work.
  - npongratz 3y ago
    > That's because the government is a monopoly on buying those services from the service providers That's called a monopsony: https://www.investopedia.com/terms/m/monopsony.asp https://www.investopedia.com/terms/m/monopsony.asp "A single buyer dominates a monopsonized market while an individual seller controls a monopolized market."
  - chimeracoder 3y ago
    > That's because the government is a monopoly on buying those services from the service providers That's true in some markets, but not all.
- Aunche 3y ago
  Pharmaceutical companies will continue to develop new drugs so long as Americans are willing to spend infinite money on them. If they can make a marginal profit on selling some to a European country, that's a nice bonus. If the US also implemented price controls, companies would have little incentive to fund the development of new drugs.
  - HarryHirsch 3y ago
    Offsetting R&D costs and directing R&D are a policy problem, and a completely different beast. The antibiotic resistance crisis is in front of us, yet the big returns are in cancer, with the additional wrinkle being that what is needed is new antibiotics of last resort. That's a problem of a kind that the market cannot solve. Also: generic shortages. Generics are a low-margin business with maybe 6 suppliers workdwide. If one facility goes off-line for this or that reason there's going to be a shortage, and slack capacity is punished by the market. Right now the cisplatin shortage is in the news, and again the market is no help.

asdff 3y ago

How much would a gallon of milk be without subsidies to the farmer and producer? $40?

mullingitover 3y ago
I think it's the other way around - without the government stabilizing the market with subsidies, dairy would be dirt cheap, then expensive, then cheap, then totally unavailable, etc. Edit/correction: actually, the USDA doesn't operate price floors anymore. "Eventually, the USDA decided it had had enough, ending the price support program in 2014."[1] [1] https://modernfarmer.com/2022/05/cheese-caves-missouri/ https://modernfarmer.com/2022/05/cheese-caves-missouri/
- zeroonetwothree 3y ago
  The market has already come up with a solution for this--futures.
  - sokoloff 3y ago
    The contract size for milk future is 200K pounds, a little over 23K gallons, or about 500 years of my family's consumption. Futures are not a good answer for my use case as a dairy consumer.
    - nayuki 3y ago
      It's like you never heard of wholesalers vs. retailers. You're acting like your family has to buy milk by the tankerful or flour by the palletful. More examples from daily life: The electricity market, board lots vs. odd lots in stock trading, fractional shares, restaurant supply stores.
doubled112 3y ago
In Canada dairy farms throw out their over supply. There are quotas and they cannot exceed them. If that's not price fixing the other way, I don't know what it is. Like the comment next to mine says, it is likely to ensure stability.

deleted 3y ago

[deleted]

ACow_Adonis 3y ago

That's because the debate and popular press around all this discussion in Australia (and elsewhere) is a populist/political cluster fuck and has almost nothing to do with economics. Reserve bank doesn't want to talk about its roll in credit/ monetary expansion during the pandemic, gov doesn't want to talk about its policies to do the same and not wanting to address inflation through taxation or fiscal policy, business wants to pretend its not self interested and profit seeking, consumers don't want to admit that they might actually have to make some price-elastic decisions or change behaviours based on how much things cost, and everyone wants to pretend that we weren't responsible for fucking up housing over the last 20 years of policy or that there will be real repercussions from the boomers aging out. So instead we get economic discussion that looks more like the multiple spider-man pointing meme.

failuser 3y ago

Price controls are rarely the best option (there are price controls, e.g. utilities are highly regulated). But in general you should address the causes, not try to mess with the outputs. E.g. break down the monopolies. The only reason those were allowed to raise their head again was the promise of efficiency and lower prices. I think they forgot it.

CTDOCodebases 3y ago

They want inflation. How else are they suppose to get rid of all the debt they acquired during the pandemic and continue to meet ongoing demands? Look at the signs: - increased immigration during a housing crisis. - pay rises for the masses to push them into higher tax brackets. - slow gradual rate rises below inflation levels to avoid crashing the markets and to allow debtors to exit their positions without triggering a recession. They want inflation. In a high inflation environment the entities that win have income generating assets (in this case tax payers) and high levels of debt. The debt essentially gets inflated away.

trog 3y ago
Applying Hanlon's Razor here: I do not believe the Australian government wants inflation. I believe they are generally incompetent, not malevolent. They are too scared to do anything and risk losing the next election, despite the fact that they literally just won one, and they are too uncoordinated to do anything useful. It's easier to literally sit there and do nothing and put all the blame on the RBA and hope that it magically fixes itself somehow.
- CTDOCodebases 3y ago
  It’s not malevolence though. It’s incentives. Therefore Hanlon’s Razor does not apply. The debt has to get paid somehow in order for the government to meet its ongoing financial obligations.
  - juve1996 3y ago
    Is Australia currently not meeting their debts or at risk in the short term future of not?
    - CTDOCodebases 3y ago
      You haven’t defined short term but I will say no. When I say ongoing obligations I am referring to welfare and Medicare. EDIT: Australian debt to GDP: https://tradingeconomics.com/australia/government-debt-to-gdp#:~:text=Government%20Debt%20to%20GDP%20in,percent%20of%20GDP%20in%202008 https://tradingeconomics.com/australia/government-debt-to-gd.... For a US perspective see below: https://uscmarshallweb.s3-us-west-2.amazonaws.com/assets/uploads/s1/files/keynote_speech_of_stan_druckenmiller_at_the_37th_usc_marshall_center_for_investment_studies_annual_meeting_may_1_2023_hdmqn6eb4m.pdf https://uscmarshallweb.s3-us-west-2.amazonaws.com/assets/upl...

ojbyrne 3y ago

As far as the US is concerned, nobody has good memories about the last time that was tried: https://www.cato.org/commentary/remembering-nixons-wage-price-controls https://www.cato.org/commentary/remembering-nixons-wage-pric...

fineIllregister 3y ago

I'll chime in because everyone is replying to complain about price controls. There is an alternative: windfall profit taxes. These have been proposed (by one political party) and blocked (by the other political party).

csomar 3y ago

> It does not ask or legislate for prices to not go up. Yeah, this worked very well for every country/government that tried this.

csense 3y ago

They tried price controls in the 1970's. It led to lines at gas stations, shortages, and rationing. Price controls are always either a no-op (if supply meets demand below the mandated price), or lead to shortages. For the good and simple reason that, if there's 100 units of X and people want 120 units, you have to have some algorithm to decide who doesn't get as much X as they want. With no price controls, businesses see X is selling quickly and raise the price (hopefully before the inventory hits zero all along the supply chain). Long-term, the high price encourages suppliers to produce more; the price provides a feedback signal that says "make more of this." With price controls, that doesn't happen. The product simply sells out because there's not enough to go around, and the 20 unlucky people who don't get their X are whoever happens to walk into the store when the shelves are empty, or are at the back of the line when a shipment comes in.