Price Controls : Surpluses

It is not only possible for price controls to create shortages (as evidenced during World War II rent control – see pp. 105), but also surpluses. Since price controls do not allow the actual conditions of supply and demand to be reflected in prices, it is not surprising when a price floor on a particular good ends up producing a surplus of that good. 

            During the Great Depression of the 1930’s, agriculture prices on certain goods were maintained by the government at artificially higher levels. Regardless of the possibly benevolent or altruistic ambitions of politicians backing such controls, what resulted from them was disastrous. The artificially high prices eventually lead to a reduced demand from consumers, leaving many farmers with surplus crops and other excess amounts of goods. In order to fulfill their end of the bargain, the federal government was obligated to purchase the surplus goods of many farmers, only to turn around and intentionally destroy such goods despite widespread malnutrition throughout the country. In 1933 alone the federal government purchased 6 million hogs and then subsequently obliterated them. 

            This clearly exemplifies the real economic consequences of price controls, and why it necessary for the government to maintain a non-interventionist position in relation to the free market. 

Dylan Shetler is a freelancing writer and Christian apologist. You can follow him on Twitter @shetler_dylan

3 Comments

  1. Couldn’t agree more! Prices are one of the few signals we have in the market giving us a clue of where to allocate our resources.

    When prices are distorted by pricing floors and ceilings they no longer reliably serve their purpose in economic exchange. The Law of Supply-and-Demand is arguably one of the most elementary rules governing the study of economics. It requires a criminal amount of ignorance or hubris to believe you can manipulate prices without any ill effects. The food shortages in Venezuela should be a salient example of the consequences of price controls.

    Liked by 1 person

    1. Definitely! There are countless instances of the disastrous economic implications following the application of price controls, yet such exemplifications seem to remain invisible to many voters and politicians. However (particularly for politicians) if not invisible, then deliberately obscured. Remember, “it’s good to look for something that you don’t want to find in a place where you know that it won’t be.”

      On a side note : Merry Christmas!

      Liked by 1 person

      1. I can’t argue there. It’s probably easier to look the other way if your seat in congress is on the line. Making the incentives align with bad economic policy.

        Merry Christmas to you as well. If I don’t hear from you again before the holiday.

        Liked by 1 person

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