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Price controls are one of the few things that economists on both sides of the political aisle agree do not work, and/or have unintended consequences which are w

Price controls are one of the few things that economists on both sides of the political aisle agree do not work, and/or have unintended consequences which are worse than the problem they attempt to resolve. https://www.econlib.org/the-consensus-on-price-controls/ https://www.econlib.org/the-consensus-on-price-controls/

jayd16 3y ago
I don't think that's a fair take on the suggestion. What if it was something like Medicare where services were tax funded and costs are negotiated but fixed?
skissane 3y ago
> Price controls are one of the few things that economists on both sides of the political aisle agree do not work, and/or have unintended consequences which are worse than the problem they attempt to resolve. Australia effectively has price controls on both health and tertiary education. It isn’t perfect but it is hardly terrible. I know the US pharmaceutical industry hates it - the Australian government uses its monopsony power to limit drug prices and hence drug company profits - and is forever lobbying the US government to use trade negotiations to pressure to undermine it (but hasn’t yet succeeded) Universities can charge as much as they want - but if they want students to have full eligibility for government student loans and government tuition subsidies, there is a maximum they can charge. Students want that full eligibility, so for the majority of places they stick to the maximum
pixelatedindex 3y ago
Sometimes it feels like economists come up with these ideas in an ivory tower, detached from reality. Any kind of price control seems to make economists very upset, rent control being another example. Reality is that there are so many other factors that it’s probably better to have some sort of price control as a form of regulation, instead of only focusing on supply/demand levers. I’m not an economist so I’m happy to be proven wrong, but the stance of “x,y and z policies need to be implemented so supply/demand is changed to mitigate these issues”, but the reality is that politicians and the business landscape doesn’t incentivize such changes. For example, colleges aren’t incentivized to keep the cost low, housing construction isn’t incentivized because NIMBYs control what can be built where, etc. So when someone says “well the economists don’t agree on that”, it really rubs me the wrong way.
- gottorf 3y ago
  > Any kind of price control seems to make economists very upset, rent control being another example. They're probably upset the same way that climate scientists get upset when people dispute climate change; that is, it's a widely-studied phenomenon by economists of all political persuasions with lots of evidence to back it up. A price ceiling causes a shortage, like cars lining up at gas stations during the 70s oil crisis or the 10+ years of wait time in Stockholm apartments. A price floor causes a surplus, like unemployed workers at the minimum wage.
  - AngryData 3y ago
    That is not a good comparison. Scientists that disagree with climate change are like a couple percent at max. Meanwhile nearly every economic topic, including price controls, would have double digits of economists disagreeing with it. Economics is not a hard science where you can take anything in absolutes.
    - somewhat_drunk 3y ago
      Disagree. Climate science and economics are quite similar in this context, in that both an economy and a global environment are so massive and massively complex that neither can be isolated and studied in a controlled environment. In such cases, when there does exist a consensus, it's probably correct.
- leshow 3y ago
  I'd wager econlib is cherry picking https://mediabiasfactcheck.com/the-library-of-economics-and-liberty-econlib/ https://mediabiasfactcheck.com/the-library-of-economics-and-... Mainstream economists have thought very different things at different times. The current mainstream orthodoxy is largely free market fundamentalists that took over in the 80's. There are heterodox economists that disagree with this view. Practically, there are also many examples of price and rent controls and de-commodification "working" throughout modern history and currently on other countries.
  - 3y ago
crote 3y ago
That's not quite true. See for example the existence of the billions of $ of corporate agricultural subsidies, essentially creating an artificial price floor. The primary reason price ceilings are criticized by "both sides" is because the shifting Overton window has resulted in both the Republican and Democratic parties having quite neoliberal views. In an international context the two sides of the aisle can be described as "right" and "far-right".
Scarblac 3y ago
Paraphrasing the Onion -- "This policy doesn't work", agree politicians on both sides of the aisle in only country that has this problem.
tomjakubowski 3y ago
You won't find many economists arguing against farm subsidies, which are a form of price control. This is among the oldest practices of statecraft in history.
basisword 3y ago
Seems to work well in the UK. Fees are set by the government and the government provides the loans. Private Uni's can set their own price but the government loan will only only fund about £6k (£3k less than the public Uni fee). Because of this, many private Uni's set their fees at £6k and then make their money on international students.
mitchdoogle 3y ago
That depends on what it means for this to be "working"

jayd16 3y ago

I don't think that's a fair take on the suggestion. What if it was something like Medicare where services were tax funded and costs are negotiated but fixed?

skissane 3y ago

> Price controls are one of the few things that economists on both sides of the political aisle agree do not work, and/or have unintended consequences which are worse than the problem they attempt to resolve. Australia effectively has price controls on both health and tertiary education. It isn’t perfect but it is hardly terrible. I know the US pharmaceutical industry hates it - the Australian government uses its monopsony power to limit drug prices and hence drug company profits - and is forever lobbying the US government to use trade negotiations to pressure to undermine it (but hasn’t yet succeeded) Universities can charge as much as they want - but if they want students to have full eligibility for government student loans and government tuition subsidies, there is a maximum they can charge. Students want that full eligibility, so for the majority of places they stick to the maximum

pixelatedindex 3y ago

Sometimes it feels like economists come up with these ideas in an ivory tower, detached from reality. Any kind of price control seems to make economists very upset, rent control being another example. Reality is that there are so many other factors that it’s probably better to have some sort of price control as a form of regulation, instead of only focusing on supply/demand levers. I’m not an economist so I’m happy to be proven wrong, but the stance of “x,y and z policies need to be implemented so supply/demand is changed to mitigate these issues”, but the reality is that politicians and the business landscape doesn’t incentivize such changes. For example, colleges aren’t incentivized to keep the cost low, housing construction isn’t incentivized because NIMBYs control what can be built where, etc. So when someone says “well the economists don’t agree on that”, it really rubs me the wrong way.

gottorf 3y ago
> Any kind of price control seems to make economists very upset, rent control being another example. They're probably upset the same way that climate scientists get upset when people dispute climate change; that is, it's a widely-studied phenomenon by economists of all political persuasions with lots of evidence to back it up. A price ceiling causes a shortage, like cars lining up at gas stations during the 70s oil crisis or the 10+ years of wait time in Stockholm apartments. A price floor causes a surplus, like unemployed workers at the minimum wage.
- AngryData 3y ago
  That is not a good comparison. Scientists that disagree with climate change are like a couple percent at max. Meanwhile nearly every economic topic, including price controls, would have double digits of economists disagreeing with it. Economics is not a hard science where you can take anything in absolutes.
  - somewhat_drunk 3y ago
    Disagree. Climate science and economics are quite similar in this context, in that both an economy and a global environment are so massive and massively complex that neither can be isolated and studied in a controlled environment. In such cases, when there does exist a consensus, it's probably correct.
leshow 3y ago
I'd wager econlib is cherry picking https://mediabiasfactcheck.com/the-library-of-economics-and-liberty-econlib/ https://mediabiasfactcheck.com/the-library-of-economics-and-... Mainstream economists have thought very different things at different times. The current mainstream orthodoxy is largely free market fundamentalists that took over in the 80's. There are heterodox economists that disagree with this view. Practically, there are also many examples of price and rent controls and de-commodification "working" throughout modern history and currently on other countries.
- 3y ago

crote 3y ago

That's not quite true. See for example the existence of the billions of $ of corporate agricultural subsidies, essentially creating an artificial price floor. The primary reason price ceilings are criticized by "both sides" is because the shifting Overton window has resulted in both the Republican and Democratic parties having quite neoliberal views. In an international context the two sides of the aisle can be described as "right" and "far-right".

Scarblac 3y ago

Paraphrasing the Onion -- "This policy doesn't work", agree politicians on both sides of the aisle in only country that has this problem.

tomjakubowski 3y ago

You won't find many economists arguing against farm subsidies, which are a form of price control. This is among the oldest practices of statecraft in history.

basisword 3y ago

Seems to work well in the UK. Fees are set by the government and the government provides the loans. Private Uni's can set their own price but the government loan will only only fund about £6k (£3k less than the public Uni fee). Because of this, many private Uni's set their fees at £6k and then make their money on international students.

mitchdoogle 3y ago

That depends on what it means for this to be "working"