Politicians Promise Cheap Groceries: Here Is What Actually Happens
Politicians are once again promising to make expensive things cheaper. Cory Klippsten, walking through Helsinki in the rain, explains why price controls can't deliver on that promise.A government can dictate the maximum legal price and punish people who trade above it. It can't legislate away the scarcity, production costs and individual preferences that produced the market price. Markets discover prices through the decisions people make when they actually have to trade with each other.
Cory walks through what happens when a legal price replaces a market price: Germany in 1948, where goods appeared in stores the day after prices were freed; the tomato test; WWII America's ration books and allocation boards; Turkey's bread tariff, where the committee chases costs instead of setting them; and San Francisco's 1994 rent control expansion, after which landlords reduced rental supply by 15%.
His conclusion: creating more supply, removing barriers to production and increasing competition can make things cheaper. Dictating a lower legal price doesn't accomplish any of those things.
Chapters
0:00 Hello from Helsinki
0:17 The easiest promise in politics
1:04 What a government can and can't do
1:35 Germany, 1948
2:57 The tomato shortage
3:38 Knowledge is scattered
3:55 A €2 cap on €5 tomatoes
4:25 A misleading term
4:37 WWII America: ration books and allocation boards
5:39 Turkey's bread
6:14 San Francisco rent control
7:06 What changes when the price can't
7:28 Three hours in line
7:40 Markets discover, governments dictate
8:31 Ask what happens next
Cory Klippsten is the founder of Swan Bitcoin. Receive SMS online on sms24.me
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