Price Controls: Bad Economics and Fuel for Instability

By Roman Mikhailiuk @ Shutterstock.com

Basic economics dispels the idea that price controls are useful. Nevertheless governments (including America’s) regularly try to control prices. Whether via direct price caps and floors, or quota systems, or through inflation or deflation of the money supply, government attempts to control prices are distortive to markets, and eventually lead to some kind of backlash. Sometimes the response is a black market, as is thriving in Venezuela today. Other times, hoarding takes place. Other times it’s more violent.

Sometimes, the hardest thing about price controls is removing them. People get used to paying a certain amount, and when the government attempts a market based reform, it’s not pretty. That’s happening now in Haiti, where the government has attempted to raise fuel prices to more rational levels. In response, citizens rioted, and at least four have died in the chaos. The government backed off its attempt to raise prices, but the fury it unleashed hasn’t subsided. Amelie Baron reports for AFP:

Many Haitians are now demanding the immediate departure of President Jovenel Moise.

“If the president stays one more day, the game will take on a new appearance: we will cut off the roads and burn everything, because we have nothing else to lose,” said one masked protestor.

Groups of young men trying to extort money from motorists as well as pedestrians controlled various intersections and roads in Port-au-Prince on Sunday.

Local radio reported that groups of armed people in civilian clothes had been seen in some downtown districts.

In the heart of the capital, AFP journalists saw shops ransacked as protestors demanded Moise’s exit.

Some aggressive young men carried knives, and special police crowd control units fired their guns into the air and detonated tear gas.

Unstable policies can lead to chaotic turmoil. While such an event seems unlikely in the United States, things can change rapidly. How would you and your family fare in a moment of political upheaval? Could you ride it out, safely at home? Or would you need to evacuate your area and seek safer ground?

Consider also where you’re headed on vacation. If you were vacationing in Port-au-Prince this week, it’s unlikely you were prepared for what happened. Think it can’t happen to you? Watch the video below about Americans trapped in a hotel in Haiti.