5 ms·
Price controls result in supply shortages.
by baggy_trough 3y ago
Price controls result in supply shortages.
- zbrozek 3y agoCalifornia electeds don't believe in market economics. So we get rent control, insurance control, utility control (amusingly in the higher-than-market price direction), etc.
- lern_too_spel 3y agoCalifornia elected officials didn't give us rent control. California direct democracy got us Proposition 13, Proposition 218, and most municipal rent control statutes.
- skhunted 3y agoEvery state regulates insurance and almost all of them regulate utilities. Regulating those industries is necessary.
- zbrozek 3y agoRegulating some behaviors is important, but price controls break markets by disconnecting supply and demand.
- skhunted 3y agoRegulated insurance and utilities are not allowed to charge whatever they want. This has been the case for decades. We have decades of evidence that this part of regulation is not in and of itself bad.
- zbrozek 3y agoI think you're deliberately avoiding what I am saying, which is "price controls" and pretending that I am saying "regulation". Those are completely different concepts. The article itself is showing exactly what happens when you have price controls - supply dries up and the market falls apart.
- skhunted 3y agoI think you are deliberately missing the point. Part of the regulation of insurance companies and utilities is price controls. We have decades of experience with these price controls not causing a problem. The act of having a price control does not cause supply to dry up and the market to fall apart as you say. Of course a poorly implemented price control can cause that. Price controls in and of themselves do not cause supply problems.
- baggy_trough 3y agoYou have an incorrect understanding of price controls.
- skhunted 3y agoWe have decades of experience of insurance companies and utilities not being able to charge whatever they want without causing shortages. Now, in California there is an example where this price limitation is causing some companies to pull out of the market. Price controls can be used without causing a shortage and they can be used in a such a way to cause a shortage. Price controls in and of themselves do not cause anything. It’s how they are implemented that matters.
- baggy_trough 3y agoThe consensus of economists is that you are wrong.
- skhunted 3y agoWhat economist is willing to say that there is a shortage of electricity where electric companies are regulated in the U.S. because there is a cap on how much they can charge? In almost every state there is not a shortage of companies willing to provide car or home insurance even though they are not allowed to charge whatever they want. Which economist is going to say that in those states the price control on insurance companies is causing a shortage?
- baggy_trough 3y agoRegulation could be good or bad depending on how it is crafted. That doesn't change the economic fact that price controls cause supply shortages.
- skhunted 3y agoThere have been price controls on insurance and utilities for decades. There are decades of experience where it hasn’t caused a shortage.
- baggy_trough 3y agoHow bad the shortages are would depend on how draconian the controls were relative to the market price. What we can observe today in California is that the price controls are causing a shortage.
- skhunted 3y agoSo price controls, as in the concept, does not cause shortages. Bad implemented price controls contribute to shortages. It’s not the fact that there are price controls that are cussing the shortage it’s the implementation of them in the present case.
- baggy_trough 3y agoThat is not correct. A price control that sets the price to the market price will do nothing. If it sets it beneath the market price, a supply shortage will result.
- skhunted 3y agoThen we agree that price controls can be implemented that don’t cause shortages. A price control that sets a price where a sufficient number of people are willing to perform a service or make a good do not cause shortages. Such a control in such a circumstance prevents companies from having too much pricing power over essential services. Thus they do accomplish something in such a case.
- hristov 3y agoThis is not due to price controls. California does not have much price controls on insurance, and I doubt there are any on commercial apartment buildings. This is climate change.
- bombcar 3y ago> In July 2023, State Farm applied for an average 38.7% rate hike with the California Department of Insurance for commercial apartments, according to public filings. But the department ruled the hike was not supported by data, and instead approved a 23% hike at the beginning of March. If you have to apply for a price hike, and it can be modified or refused, that's a form of price controls. And climate change isn't causing PG&E to be worthless idiots; they've always been that. The change is in the climate of the courts; they're now being held responsible. Reading the article is a superpower.
- hristov 3y agoArticle is blocked for me.
- bombcar 3y agohttps://archive.ph/fmGjC https://archive.ph/fmGjC
- shalmanese 3y agoWas there a more than 23% increase in risk due to climate change happening in a single year? 23% is an insane amount for insurance to grow on an annual basis!
- baggy_trough 3y agoInflation was 10% that year. Maybe it was even more in construction / repair costs. Then add incorrect modeling of wildfire risks on top of that.
- joebob42 3y ago
- lotsofpulp 3y agoWhy your simple statement taught in microeconomics 101 is downvoted is beyond me. California government refused insurance prices that made business possible, so the businesses decide to not sell rather than lose money.