Price control Essay Example | Topics and Well Written Essays - 1000 words

Price control - Essay Example Price control policies in history were put in place as portion of a larger income policy package while inducing wage controls as regulatory element. Price control takes two forms, a ceiling price (maximum) and the floor price (minimum) that can be charged in a market. These two forms of price control act as a regulatory element during shortages to prevent from market inflation (Rockoff, 67). The application of price control is comprehensible. However, price controls fail to safeguard many consumers and offend others. Controls hold out the promise of protecting individuals that are struggling to meet increased price. Therefore, the prohibition against moneylending, charging high interest on loans, is projected to protect individuals who are obligated to borrow out of desperation. For instance, the maximum price for bread was theoretical to protect the have-nots, who relied on bread for their survival. The rent controls were proposed policies to protect those who were renting when the demand for houses exceeded the supply thus; landlords were getting ready to â€Å"gouge prices† to their tenants (Stern, 140). Despite the appeal of frequent use of price controls, economists opposed them except in times of emergencies. According to statistics of 1992, 76.3% of the economists interviewed agreed with the slogan, â€Å"A ceiling on rents reduces the quality and quantity of house available.† An extension of 16.6% agreed with qualifications, and only 6.5% disagreed with the statement. Similar results were observed when the economists were interviewed about price controls: 8.4% agreed with the report: â€Å"Wage-price controls are a useful policy option in the control of inflation.† An extra 17.7% agreed with the results; however majority of the economist disagreed with the statement by 73.9% (Rockoff, 82). The main cause why majority of economists are cynical about price control is that they alter the allocation of resources. Remark made by an economist