Content deleted Content added
Added context to a broad and potentially misleading statement. It claimed at the bottom of paragraph two that nearly 3/4 of economists agree that price controls can limit inflation. I added the context that this is from a 30 year old survey of US economists. Tags: Mobile edit Mobile web edit |
Citation bot (talk | contribs) Altered title. | Use this bot. Report bugs. | Suggested by Abductive | Category:Price controls | #UCB_Category 40/49 |
||
| (36 intermediate revisions by 27 users not shown) | |||
Line 1:
{{Short description|Governmental restrictions on
[[File:"Prices charged in this store will not exceed those indicated in the most recent list of Fair Prices applicable to this - NARA - 512556.jpg|thumb|
'''Price controls''' are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of goods even during shortages, and to slow inflation, or, alternatively, to ensure a minimum income for providers of certain goods or to try to achieve a [[living wage]]. There are two primary forms of price control: a [[price ceiling]], the maximum price that can be charged; and a [[price floor]], the minimum price that can be charged. A well-known example of a price ceiling is [[Rent regulation|rent control]], which limits the increases that a landlord is permitted by government to charge for rent. A widely used price floor is [[minimum wage]] (wages are the price of labor). Historically, price controls have often been imposed as part of a larger [[incomes policy]] package also employing [[wage]] controls and other regulatory elements.
Although price controls are routinely used by governments, Western economists generally agree that consumer price controls do not accomplish what they intend to in [[Market economy|market economies]], and many economists instead recommend such controls should be avoided.<ref name="concise"/>
==History==
[[File:Maximum Retail Price Sri Lanka.jpg|thumb|The maximum retail price ([[Maximum retail price|MRP]]) of this bottle of water in [[Sri Lanka]] is 90 [[Sri Lankan rupee|Rupees]]]]
The Roman Emperor [[Diocletian]] tried to [[Edict on Maximum Prices|set maximum prices]] for all commodities in the late 3rd century
▲The Roman Emperor [[Diocletian]] tried to [[Edict on Maximum Prices|set maximum prices]] for all commodities in the late 3rd century [[Common Era|CE]] but with little success. In the early 14th century, the [[Delhi Sultanate]] ruler [[Alauddin Khalji]] instituted [[market reforms of Alauddin Khalji|several market reforms]], which included price-fixing for a wide range of goods, including grains, cloth, slaves and animals. However, a few months after his death, these measures were revoked by his son [[Qutb ud din Mubarak Shah|Qutbuddin Mubarak Shah]].<ref>{{cite book |author=Banarsi Prasad Saksena |author-link=Banarsi Prasad Saksena |chapter=The Khaljis: Alauddin Khalji |editor=Mohammad Habib and Khaliq Ahmad Nizami |title=A Comprehensive History of India: The Delhi Sultanat (A.D. 1206–1526) |volume=5 |edition=Second |year=1992 |orig-year=1970 |publisher=The Indian History Congress / People's Publishing House |url=https://books.google.com/books?id=_9cmAQAAMAAJ |oclc=31870180 |page=429 }}</ref> During the [[French Revolution]], [[General maximum|the Law of the Maximum]] set price limits on the sale of food and other staples.
Governments in [[planned economy|planned economies]] typically control prices on most or all goods but have not sustained high economic performance and have been almost entirely replaced by [[mixed economies]]. Price controls have also been used in modern times in less-planned economies, such as [[rent control]].<ref name="concise">{{cite encyclopedia |last1=Rockoff |first1=Hugh |editor=David R. Henderson |editor-link=David R. Henderson |encyclopedia=[[The Concise Encyclopedia of Economics]] |title=Price Controls|url=http://www.econlib.org/library/Enc/PriceControls.html |year=2008 |edition= 2nd |publisher=[[Library of Economics and Liberty]] |location=Indianapolis |isbn=978-0865976658 |oclc=237794267}}</ref> During [[World War I]], the [[United States Food Administration]] enforced price controls on food.<ref>
Line 38 ⟶ 37:
===Postwar===
[[Incomes policy|Wage controls]] have been tried in many countries to reduce [[inflation]], seldom successfully.
====United Kingdom====
Line 46 ⟶ 45:
====United States====
In the United States, price controls have been enacted several times. The first time price controls were enacted nationally was in 1906 as a part of the [[Hepburn Act]].<ref>
In 1971, President [[Richard Nixon]] issued Executive Order 11615 (pursuant to the [[Economic Stabilization Act of 1970]]), imposing a 90-day freeze on wages and prices. The constitutionality of this action was challenged and upheld in the case of Amalgamated Meat Cutters v. [[John Connally|Connally]]<ref>{{cite court |litigants=
The individual states have sometimes chosen to implement their own control policies. In the 1860s, several midwestern states of the United States, namely Minnesota, Iowa, Wisconsin, and Illinois, enacted a series of laws called the [[Granger Laws]], primarily to regulate rising fare prices of railroad and grain elevator companies.
The state of [[Hawaii]] briefly introduced a cap on the wholesale price of [[gasoline]] (the [[Gas Cap Law]]) in an effort to fight "[[price gouging]]" in that state in 2005. Because it was widely seen as too soft and ineffective, it was repealed shortly thereafter.
▲The state of [[Hawaii]] briefly introduced a cap on the wholesale price of [[gasoline]] (the [[Gas Cap Law]]) in an effort to fight "[[price gouging]]" in that state in 2005. Because it was widely seen as too soft and ineffective, it was repealed shortly thereafter.<ref>the well of natal</ref>
====Venezuela====
Line 95 ⟶ 59:
====India====
In India, the government first enacted price control in 2013 for the Drug Price Control
====Sri Lanka====
In Sri Lanka, the Consumer Affairs Authority has the power to set the Maximum Retail Price (MRP) for goods specified by the government as essential commodities.<ref>{{Cite web |title=Pricing and Management Division |url=http://www.caa.gov.lk/web/index.php?option=com_content&view=article&id=122&Itemid=749 |access-date=2023-07-08 |website=www.caa.gov.lk}}</ref> In 2021 the Sri Lankan government enacted price controls on several essential items resulting in shortages.<ref>{{Cite web|url=https://www.aljazeera.com/news/2021/8/31/sri-lanka-food-prices-emergency-forex-crisis|title=Sri Lanka declares food emergency as forex crisis worsens|website=Al Jazeera|access-date=2022-02-17}}</ref><ref>{{Cite web|url=https://www.aljazeera.com/news/2021/10/8/sri-lanka-allows-sharp-rise-in-food-prices-to-ease-shortages|title=Sri Lanka allows sharp rise in food prices to ease shortages|website=Al Jazeera|access-date=2022-02-17}}</ref>
==Price floor==
{{Main|Price floor}}
[[File:Fight for $15 on 4-15 (17161520871).jpg|thumb|right|200px|Protesters call for an increased legal [[minimum wage]] as part of the "[[Fight for $15]]" effort to require a $15 per hour minimum wage in 2015. A government-set minimum wage is a price floor on the price of labour.]]
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product,<ref>
{{cite web
Line 114 ⟶ 78:
</ref> good, commodity, or service. A price floor must be higher than the [[equilibrium price]] in order to be effective. The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market). Governments use price floors to keep certain prices from going too low.
Two common price floors are [[minimum wage law]]s and [[supply management (Canada)|supply management]] in Canadian agriculture. Other price floors include regulated US airfares prior to 1978 and minimum price per-drink laws for alcohol.[[File:"Cost of Living 1918-1944" - NARA - 514088.jpg|thumb|250px|World War II poster about US price controls]]Since the [[credibility revolution]] starting in the 1990s, minimum wages have often found strong support among economists.<ref name=":0" /><ref name=":1" /><ref name=":2" /><ref name=":3" />
Advantages of a price floor are:
*
*
*
* May reduce poverty and increase productivity among employees (in minimum wages)
Disadvantages of a price floor are:
* Supply
* Resources
* The government may be forced to buy the excess supply or it may be discarded (e.g., in an agricultural context).
Line 145 ⟶ 110:
[[Nobel Prize in Economics|Nobel Memorial Prize]] winner [[Milton Friedman]] said, "We economists don't know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can't sell tomatoes for more than two cents per pound. Instantly you'll have a tomato shortage. It's the same with oil or gas."<ref>"Controls blamed for U.S. energy woes", ''Los Angeles Times'', February 13, 1977, Milton Friedman press conference in Los Angeles.</ref>
U.S. President [[Richard Nixon]]'s [[Secretary of the Treasury]], [[George Shultz]], enacting Nixon's "New Economic Policy", lifted price controls that had begun in 1971 (part of the [[Nixon Shock]]). This lifting of price controls resulted in a rapid increase in prices. Price freezes were re-established five months later.<ref>{{cite web|url=http://www.treasury.gov/about/history/Pages/gpschultz.aspx |title=George P. Shultz (1972–1974) |publisher=Treasury.gov |date=2010-11-20 |access-date=2013-09-27}}</ref>
==See also==
* [[2021–2022 global energy crisis]]
* [[Administered prices]]
* [[Capital control]]
* [[Council on Wage and Price Stability]]
* [[Maximum retail price|Maximum Retail Price]]
* [[Monopsony]]
* [[Price ceiling|Price Ceiling]]
==References==
Line 160 ⟶ 128:
==Further reading==
* {{cite encyclopedia|last=Boudreaux |first=Donald |author-link=Donald Boudreaux|editor-first=Ronald |editor-last=Hamowy |editor-link=Ronald Hamowy |encyclopedia=The Encyclopedia of Libertarianism |chapter=Price Controls|chapter-url=https://sk.sagepub.com/reference/libertarianism/n241.xml|url= https://books.google.com/books?id=yxNgXs3TkJYC |doi=10.4135/9781412965811.n241 |year=2008 |publisher= [[SAGE
== External links ==
{{Wikiquote}}
* "[http://www.franciscovergara.com/PriceControls.doc The Theory of Price Controls]" by Stephanie Laguerodie et Francisco Vergara (de Review of Political Economy, October 2008)
{{Microeconomics}}
{{Population}}
{{Authority control}}
| |||