The case against price controls

A question asked privately:

Why do economists seem to think that price controls are a bad idea?

Because price controls have been tried before in various (mostly Communist) countries around the world, and the results were a disaster.

Essentially, as Friedrich von Hayek explained, market price is an information transmission mechanism; producers know that they need to produce more when the prices are going up. With regulated prices, information transmission breaks down; producers don’t act to fill the shortages, so shortages expand until the whole economy becomes one big shortage…

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