Monday, March 03, 2008

Venezuelan Price Controls

Here is an interesting article about what life is actually like in Venezuela. Who would have imagined that someplace like Venezuela would have a coffee shortage? Well, that's what price controls will get you.

The logic behind price controls, considering what happens when you implement them, is pure insanity. This is how it goes: "It's not fair that people have to pay $X for coffee. Therefore, we are going to set the price of coffee at $X/2, which will result in two things: 1) sales of coffee going up, and 2) production of coffee going down, since it costs more than $X/2 to produce coffee for most is not all growers. As a result, there will quickly develop a coffee shortage, meaning no more coffee will be available for anyone, rich or poor. Thus, both the rich and the poor will be worse off since neither will be able to have any coffee at all, which is fair, since both parties equally have nothing." At the point where you have created shortages of goods, the only way you can justify keeping price controls is with the aforementioned logic. For some people, it is more fair that nobody have any of a good than that poor people have Y good and rich people have 10Y. Better that everybody have 0, because that is fair, since everyone has the same amount. Sure, everyone is worse off, but at least everyone is equal -- equally poor, equally deprived. Anybody who would implement price controls -- or continue them after, yet again, they result in shortages -- are either incredibly stupid or just plain evil.

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