Argentina Imposes Price Controls

According to this article, the government of Argentina is going to impose price controls on all supermarket products to try to break its runaway inflation.  This sounds like a good idea, but is it?

Perhaps not.  As Thomas Sowell explains here, the predictable result of price controls is a shortage of the good whose price is controlled.  If the price is kept low by government fiat, people demand more than they would otherwise, because they don’t have the higher price to induce self-rationing.  At the same time, because the price cannot rise, producers of the good in question have no incentive to produce more.  The result of too much demand and not enough production is shortage.

All this reminds me of another question, one that Thomas Sowell would certainly want us to ask: What is the cause of Argentina’s problem with inflation?  Has the government done something to induce inflation, and is it now imposing price controls as the solution to the problem that it has itself created?  The news report linked above does not say anything about this question, but it is certainly one worth asking.

Sowell, by the way is a wonderful guide to the unintended consequences of government efforts to regulate the economy.  He has been an immensely productive scholar and has written many books, but on this topic Basic Economics and Economic Facts and Fallacies two might be a good place to start, for those who are interested.  Sowell’s work on these matters is very important for the health of our democracy.  Politicians routinely win elections by promising all manner of government policies, but of course without acknowledging the costs of those policies.  Sowell is a great one for pointing out those costs, so that those who listen can think more critically about what they are being promised.



  • abadilla

    The lady president is as leftist as the one here, so what can we expect from her?



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