Can price controls beat the market?
Economists have been insisting that price controls are bad economics forever. Are they (unconditionally) right?
People not only prefer lower prices to higher ones, but also often instinctively assume that higher prices are indicative of profiteering. Common wisdom would seem to have it that a price should be, if not equal to the costs, then at least very close to it. So, when prices rise, especially when they do so rapidly, the suspicion of profiteering strengthens. That is when citizens look to the government to put a stop to ‘price gouging’ and ‘greedflation’: they want it to prevent retailers or landlords from increasing prices. It is then tempting for politicians to heed those calls and introduce price controls.
A recent high-profile instance is that of tickets for the reunion tour of the rock band Oasis. These carry a face value of around £150 (€175) in the UK for the most popular ones. That may seem expensive, but with a hard limit on the number of tickets, and huge demand, it was no surprise that within hours, tickets were offered on reseller sites at up to 40 times face value. This was despite the fact that the band had stated that tickets could only be resold at face value through official resellers (and that other tickets would be cancelled) — a de facto price control…
