The case against price controls
Christopher J. Neely argues that price controls could temporarily reduce inflation but are a terrible idea because:
- A government bureaucracy and law enforcement must be funded to enforce the controls.
- Goods and services are allocated inefficiently, both in consumption and production.
- Competition shifts from production to political markets as firms attempt to influence price-setting decisions.
- Widespread evasion of price controls promotes disrespect for the law.
- Suppressed inflation appears when temporary controls are relaxed.
Why Price Controls Should Stay in the History Books
Author: Christopher J. Neely
From: Federal reserve Bank of St. Louis
How consumers perceive price controls
Elias et al., in this paper, ran a survey experiment with 3,782 U.S. and 3,830 Canadian residents between May and December 2021. They found that people do not perceive prices as only signals of relative scarcity, but they attribute moral valence to them. Consistent with prior studies, price spikes in response to demand increases receive widespread opposition and generate moral aversion, mainly out of concerns for fairness toward and exploitation of consumers.
Despite the large positive impact of explicit cost-benefit considerations on the acceptance of the free price mechanism to organize markets, most respondents, even when assigned to scenarios with salient tradeoffs, did not support a “laissez faire” solution to price surges. This suggests that this opposition is rooted in strong beliefs and norms whose violation could represent a cost to society. Policy choices and organizational practices that reduce the likelihood of price spikes may therefore be supported by the public.
Is the Price Right? The Role of Morals, Ideology, and Tradeoff Thinking in Explaining Reactions to Price Surges
Authors: Julio Elias, Nicola Lacetera, Mario Macis
From: University of CEMA, University of Toronto, Johns Hopkins University
What does a panel of US economists think?
From Chicago Booth’s Initiative on Global Markets
