Price Controls make Scarce things Scarcer

Posted by PITHOCRATES - October 23rd, 2011

Week in Review

If there’s anything that tells us not to take mainstream economists or the United Nations or the International Monetary Fund or other global organizations seriously it’s this (see Economists Call for Crop-Trading Limits to Curb Volatility by Alan Bjerga posted 10/10/2011 on Bloomberg Businessweek).

Hundreds of economists including scholars from Oxford University and the University of California, Berkeley, are asking the Group of 20 nations to impose limits on speculative positions in food commodities to curb volatility in crop prices…

Research sponsored by the United Nations, International Monetary Fund and other global organizations suggest speculation in crop futures by index funds and large banks may cause price spikes that can put grocery costs out of reach for poorer people. Global regulation of speculators has been a goal of French President Nicolas Sarkozy during his term as leader of the G-20 this year.

What’s the common thread in all these organizations?  They’re all Keynesian tax and spend big world government.  And, surprise, surprise, they want more control over the world’s economies.

Have we learned nothing from the Nixon’s price controls of the Seventies?  Price controls make scarce things scarcer.  Did rent control make more low-income housing available?  No.  Did price controls make gasoline more available?  No.  Why?  Because market prices match supply to demand.  And when you mess with the market price mechanism, you mess with supply and demand.  Resulting in shortages.  Such as low-income housing and gasoline during the Seventies.

Messing with prices doesn’t make scarce things less scarce.  So why do it?  Because that’s what Keynesian tax and spend big world government does.  It’s not about the economy.  It’s about power.  Their power.  And they want more.

The 2008 spike in gasoline prices is an example of this pricing mechanism.  The run up that peaked in July 2008 was due to a fall in OPEC production, not speculation (see Federal Reserve Bank of Dallas Clearly Explains Why Speculation Didn’t Drive Oil Prices in 2008 by Kay McDonald posted 10/14/2011 on big agriculture picture).  The high gas prices in 2008 just made sure that a scarce resource was available for those who really needed it.  People drove less over the summer.  Which made a scarce resource available for those who really needed it.  The result?  No gas shortages.  And no gas lines.  Like in the Seventies.

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