A problem common to all governments
Entrepreneurs complain about price controls in all countries where they apply. They argue that such controls constitute a discouragement to production and generate scarcity because when applied, producers and traders stop manufacturing and selling controlled products. And they are right, that is really the consequence of price controls. But the other true fact is that competition in the Market is not effective enough and the tendency to speculate by unduly raising prices is a reality in all free competition markets.
Given these two true and contradictory facts, the big question that arises for those who have the duty to protect the interests of the population, that is, for the political authorities of the State is what to do to prevent speculation and guarantee the enjoyment of the goods to all the citizens?
My answer is as follows:
- Price controls are not effective because they are certainly not complied with in practice and result in the disappearance of controlled products from the market.
- The solution is Consumer Orientation and Education so that they do not buy products at speculative prices. Obviously, there are the so-called inelastic demand products, that is, products that the consumer has to buy at the price they impose because they have no other alternative, for example, medicines, which constitute an exception and would require a price agreement between the State and producers.
- My essential proposal is that Consumer Orientation and Education be carried out through large public opinion campaigns developed directly by the State in the media. If tomorrow, a product increases its price in an excessive way, the State in its Consumer Orientation and Education campaign must denounce it and ask consumers to stop buying that product and / or replace it with another one until its price is adjusted and properly corrected.
- This implies the existence within the States of evaluation mechanisms sufficiently prepared from the technical point of view to evaluate costs and prices of the different products in the Market.
- The proposed idea would be the mechanism to avoid the imposition of price controls by the State with its consequences of disappearance of market products and, at the same time, a way to achieve a fairer relationship between producers, merchants and consumers.