Why Economists Don't Like Price Controls
Economists do not like price controls for multiple reasons, according to The Economist.
The World Bank recently reported that 89 percent of developing economies control the price of energy, 76 percent control the price of foods, and 13 percent control the prices of construction materials.
However, economists believe that controlling prices leads to multiple problems for economies. The main idea behind price controls is to either redistribute, stabilize, or deflate. For example, price ceilings help low-income families afford items necessary for life and price floors help farmers increase their livelihoods.
“We struggled to find an example where it has gone very smoothly,” said Franziska Ohnsorge, a lead author of the World Bank’s “Global Economic Prospects” report. For example, an increase on Santiago’s metro of $0.04 resulted in widespread unrest, brought Chile’s army onto the streets and resulted in 29 deaths last year.
Economists shared the reasons behind their dislike of price controls.