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Will Price Controls be Making a Comeback?

Macro

Economic rationality has never been a strong suit of the political class.

Whenever a crisis kicks off, all forms of economic sanity fly out the window. Under inflationary episodes, there is a major tendency for politicians to implement price controls thinking that these interventions will somehow lower prices and tame inflation.

However, basic economic logic shows that price controls, which prevent prices from surpassing a certain maximum price level, invariably creates shortages as suppliers cannot meet the artificially-induced demand.

Despite price controls failing multiple times throughout history, politicians will still feel obligated to “do something” during a crisis. History shows that politicians don’t care for basic economics and if they’re left unchecked, they will pursue destructive economic measures. 

Given the present circumstances and the ideological configuration of most politicians, price controls could likely return and cause the same damage as in previous historic instances.

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