Price controls

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Price controls are governmental restrictions 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 staple foods and goods, to prevent price gouging during shortages, and to slow inflation, or, alternatively, to insure a minimum income for providers of certain goods or a minimum 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.


  • In a free market, supply and demand would cause prices to rise where goods are in short supply and fall where they are abundant, providing incentives to move things from regions where there is a surplus to regions where there is a shortage. But where prices are fixed by law, no such price movements occur and there is no incentive to move goods between the two regions. Theoretically, a government planning commission could either issue orders to move these goods or change the prices in order to provide incentives for others to move them.
    • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 3. Price Control
  • Many American and British supporters of price control are fascinated by the alleged success of Nazi price control… These men who want to fight Nazism by adopting its methods do not see that what the Nazis have achieved has been the building up of a system of socialism, not a reform of conditions within a system of market economy.
    • Ludwig von Mises, Omnipotent Government: The Rise of the Total State and the Total War, Mises Institute (2010) p. 63. First published in 1944 by Yale University Press.
  • While price controls make it illegal for buyer and seller to make some transactions on terms that they would both prefer to the shortages that price controls entail, bolder and less scrupulous buyers and sellers make mutually advantageous transactions outside the law. Price controls almost invariably produce black markets, where prices are not only higher than the legally permitted prices, but also higher than they would be in a free market, since the legal risks must also be compensated. While small-scale black markets may function in secrecy, large-scale black markets usually require bribes to officials to look the other way.
    • Thomas Sowell, Basic Economics, 4th ed. (2010), Ch. 3. Price Control

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