Price Controls

Consumer Benefit or Profiteering Socialism?

In a purely capitalist market, when the government imposes price controls they are legislating regulations which set the maximum price at which goods and services can be sold. Price controls are nothing new to American capitalism. They were instituted during World War II in an effort to curb high inflation which arose from rationing. Price controls are also regularly used in times of peace in order to fight inflation, as the ones instituted by Richard Nixon were designed to do during the 1970s. When markets are restricted they often mandate price controls and the use of price controls is not always effective. Further, price controls usually create a black market in the goods and services whose prices are regulated by the government. Price controls are just one type of economic intervention on behalf of the government in order to control the economy. Interest rates, wage freezes, and devaluing the dollar, among other economic tools, also have an affect on the economy and allow the government to control free markets.

The public is divided when it comes to price controls. Many believe the government should take the traditional hands-off or laissez faire approach to industry intervention. Yet, many industries are often the target of intervention by the government in an effort to control the economy of the nation. One reason for this may be that public support seems to be growing in favor of the opinion tha

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n the minimum wage will help some workers and harm others. It is also seen as being against the main goal of any business, increased profitability. This is a power model that sees the employer pitted against the employee. When employers have power, they are able to devalue the work of employees and pay them less. When employees have power, via government regulated higher wages, it sees this benefit coming at the expense of employer profits. Still, price controls in the name of consumer benefits are hardly a reality. The fact is, price controls are a way for government to interfere in industry by coercing prices from the top-down, instead of letting consumers and the free market control pricing through competition among other factors. We have a perfect example of the danger of price controls in the amazingly low price of a gallon of gasoline in today's economy. After the period of heavy price controls on petroleum in the 1970s, when gasoline prices continued to escalate, Ronald Reagan deregulated the petroleum industry. At the time, Senator Howard Metzenbaum, who vowed he was acting in the interest of consumers, stated, "With one stroke of the pen President Reagan put into jeopardy his entire commitment to wring the disast

Category: Economics - P