Here’s your starter for ten. When did this report appear on the BBC’s website?
“The government is discussing plans for supermarkets to introduce a cap on the price of basic food items to help tackle the rising cost of living. A voluntary agreement with major retailers could see price reductions on basic food items like bread and milk. Downing Street sources have stressed that there are no plans for a mandatory price cap. Supermarkets are expected to be allowed to select which items they would cap.”
It is difficult to think of a more idiotic, wrong-headed and misguided mechanism for tackling inflation
We learned last night that Rachel Reeves is asking supermarkets to impose a voluntary price cap on around twenty items. Understandably, the proposal has led to a mix of incredulity, anger and no little bemusement. In the wake of surging food inflation, which is expected to get worse, the Chancellor is trying to lessen the impact on the cost of living. But it is difficult to think of a more idiotic, wrong-headed and misguided mechanism for tackling inflation.
Price controls do not work – cannot work – in a market economy, mainly because the price of a good or service is not only the vital summation of the various factors which are involved in demand for or supply of those goods and services; the price is uniquely able to transmit such information across the economy. Price controls destroy that mechanism and usually makes things worse by boosting demand and causing supply shortages.
