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Prices: Why do they matter? | Chapter 8

Pandemic Pricing: Why Prices Need to Rise During Emergencies

During emergencies, increased demand for goods and services often causes prices to rise. Though they may seem cruel, higher prices discourage hoarding and encourage manufacturers to increase production. Price controls that stop the prices of essential products from rising in emergencies lead to shortages that leave everyone worse off.

Price Controls: Still a Bad Idea

The disruptive effects of inflation on people’s lives are not to be taken lightly, but responding with price controls fails to provide a long-term solution. The underlying principles driving the change in prices cannot be fixed by blaming corporations for higher costs. Previous efforts to use price controls resulted in shortages far more painful than the inflation they were meant to cure.

The Problem with Wage and Price Controls: Lessons from the 1970s

During an economic decline, the first response from many politicians is to manipulate market-based prices or wages. However, history has repeatedly shown that artificially manipulating prices to in order to solve political problems only leads to detrimental shortages, job losses, and other economic hardships. True market-based prices and wages are vital, as they provide insight into consumer preferences, job skills, and available resources.