Price controls disrupt the market mechanism from "summary" of The Road to Serfdom by Friedrich August Hayek
Price controls, by their very nature, interfere with the spontaneous order of the market. When government authorities set prices below the level that would otherwise prevail in a free market, they create a situation where there is excess demand for certain goods or services. This leads to shortages, as suppliers are unable to meet the increased demand at the artificially low price. Conversely, when prices are set above the equilibrium level, there is excess supply in the market. This can lead to surpluses, as consumers are unwilling or unable to purchase the goods or services at the elevated price. In both cases, the normal signals that prices send in a market economy are distorted, leading to inefficient resource allocation and economic inefficiencies. Furth...Similar Posts
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