+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).
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
> 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.
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"!
> 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.
> 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.
> Generally it goes the other way around. First government imposes price controls, which cause scarcity. Then they impose rationing.
So if price controls + rationing were implemented at the same time, you think it could work to avoid scarcity? If not then why even bring up the order in which things are implemented?
+1 this is my point, you can frequently implement multiple overlapping policies whose combined effect is better than an individual policy. Order doesn't matter.
When you say "price controls don't work" you lack imagination for the space of possible policy problems and solutions. Sometimes price controls will be a useful part of a policy solution and likely more often than some randos on the internet can think of off the top of their heads. In general I would not bet on the idea that "mechanism X is shit because it's not the free market." Our societies have implemented many engineered economic mechanisms, some of which are easy scapegoats because they fail, but many of which are overlooked because they work quietly in the background.
> 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're conflating two distinct sets of people:
- Most consumers pay a fixed price for electricity set by their utility. Many of these people experience blackouts when there was insufficient supply at that price.
- Some consumers opted into paying a variable price for electricity. As supply decreased, the price they paid massively increased. But in exchange for the high bills, these customers did not experience blackouts, or at least experienced them later than others.
Some in the second group, in retrospect, would have preferred the blackout to the increased price, or perhaps didn't understand the implications of their decision when they originally signed up for a variable and uncapped price. But overall, this situation perfectly illustrates the tradeoffs of controlled vs. uncontrolled prices in the face of supply shortage.
I'm not conflating them, I'm explicitly talking about the latter group.
> But in exchange for the high bills, these customers did not experience blackouts, or at least experienced them later than others.
Yeah, so regardless of timing or how much blackout they experienced relative to everyone else, they did experience blackouts. And still paid a lot of money too. Lack of price controls didn't help them in the short term, and in the long term hurt them a lot.
> so regardless of timing or how much blackout they experienced relative to everyone else, they did experience blackouts. And still paid a lot of money too.
free market doesn't guarantee anything. You're assuming that the free market without price control is supposed to guarantee the access to electricity, even at exorbitant prices.
Those who paid a high bill who did eventually got cut off - they got a bad deal because they weren't savy enough to do risk management, and didn't have enough information on such rare events.
Free markets _do_ presuppose supply being available if given enough money! Free markets assume atomic actors, instant feedback loops, and nothing like a supply ceiling.
The Texas blackout had a supply ceiling, but no price ceiling (and low elasticity in choice from the consumers, because people didn't want to freeze). It's a far cry from a free market during that week.
