Price Controls Have Failed for 4,000 Years—and Humans Still Haven’t Learned

The Story of Eshnunna Price Controls

• In 1892 the French archaeologist Henri Pognon made a historic discovery a few dozen miles northeast of Baghdad: a massive tell that held the ruins of the ancient city-state Eshununna.
• Among the secrets discovered on cuneiform tablets was the oldest historical record of humans fixing prices.
• Price controls don't work, and an abundance of history (as well as basic economics) proves it.

History of Price Controls

• In 388 BC, grain prices in Athens were out of control due to price fixing
• Rome attempted a price control scheme seven hundred years later on a much larger scale
• Diocletian passed the Edict on Maximum Prices in 301 A.D
• The Bengal Famine of 1770 resulted in 10 million people dying, roughly a third of its population
• Many attributed the famine to the monsoons and drought that plagued the region in 1768 and 1769

Important Market Signals

• Price controls don't work because basic economics teaches that prices are important market signals
• High prices signal to producers the opportunity for profit, which leads to more production and investment
• They also signal to consumers that the good is scarce, which encourages people to use less of it
• Putting an artificially low price on gasoline sends the wrong signals to both consumers and producers

Price Controls Are Back

• Nearly all economists agree that price controls are harmful-yet this has not stopped the specter of them from rising once again during our current global economic turmoil.
• Facing an energy crisis, G-7 countries are seeking to form a buyers cartel that would effectively put a price cap on Russian crude oil.

https://fee.org/articles/price-controls-have-failed-for-4-000-years-and-humans-still-haven-t-learned/