Voters love this solution to the affordability crisis. They’re wrong.
Voters want stuff to be cheaper.
To most economists, the best way to make things more affordable is to make them more plentiful: When the supply of a good rises, its price tends to fall. Thus, to push down the costs of expensive commodities, the government should make them easier to produce.
For example, zoning restrictions make it illegal to build apartment towers in many urban centers. This reduces the supply of housing, which leads to higher rents. Therefore, economists argue that the government should make housing more affordable by legalizing the construction of multifamily buildings.
But voters don’t love this answer. After all, it asks them to accept some immediate costs (construction noise, for example) for hypothetical future benefits. More critically, supply-side reforms do little to address their affordability concerns today. When a city council votes to upzone a neighborhood, a dozen condo towers don’t promptly sprout up through the concrete.
So, some politicians have recently gravitated towards a simpler solution to high prices: Make prices above a certain threshold illegal.
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They should decree a reduction in gravity while they’re at it.
ahah! And make the workday max 4 hours a day!
Yes. Would be fun
It was gonna be a party. I don’t know how it is in the US, but in Europe there’s already some kind of price control, especially for energy (like oil and electricity). Do you think there shouldn’t be any government price control even for energy?
no price controls on anything, ever.
Mises was always the most badass dude about this: Even in raging World War I, he went "uh-hu, better let prices work... allocate resources better to the war effort than central planning and price controls." (not a direct quote, lol)
Price controls are good in cases where there is total monopoly. Let's say, only one company providing connection to electricity grid. But not when there is competition. Government should incentivize competition instead.
nope, not right.
Natural monopoly theory is bunk.
Sometime it's monopoly by the law. For example, in Latvia power grid is monopoly of two 100% state owned companies, only power production and selling to end customers have competition. And it's ok that some regulatory board needs to review their pricings, not just their CEO / board decides whatever they want. And you pay specific fee each month for maximum connection capacity and spent kWh's to that state monopoly.
Then there is kinda not monopoly by the law, but it's practically impossible for anybody to enter the market. Say, railways tracks. It will be practically impossible to buy all the land necessary to build your own for bigger distances, even if you have shitton of money (government can do that - they just make a new law and force you to sell to them what they want).
There shouldn't. Either we have a market, where producers and consumers negotiate a price, or there is no pricing system at all. The government can't decide the price of gasoline any more than it can decree that the price of 1 BTC is 1 USD.
but I've heard Bitcoiners say "1 bitcoin equals 1 bitcoin" -- isn't that, like, profound and a sort of price fixing?!
People forget that Nixon also pulled this shit as part of his shock.
Why not ban stupidity first?
Ahah. That’s impossible to ban!
All three economists (that I know of) on SN have now chimed in. This must be a great idea!