Price Controls and Communism

Price Controls and Communism

♪ [music] ♪ – [Alex] We conclude
our discussion of price controls by talking about price controls
and communism, or planned economy. This will be brief
because the idea is pretty simple. We’ve already looked
at all the effects of price controls
in different markets. But we can think about communism
as being in some ways a system of universal
price controls. Everything is controlled
by the government. The price of all goods
is controlled by the government. So if a single price control
can have bad effects, what happens when you control
the prices of all goods? Let’s take a look. Let’s just remind ourselves of some of the important effects
of price control, both ceilings and floors. Shortages and surpluses,
depending upon whether we have the price
below the market price or the floor above the market price. Reductions in product quality
or sometimes too much quality, too much waste. Wasteful lines
and other search costs. Loss in gains from trade,
and misallocation of resources. Now communism, a command economy, can be thought of as a system
of universal price controls, price controls on all goods. And we saw exactly
these five elements occurring in countries which had universal price controls,
such as the Soviet Union. It was common for some goods
to be in shortage while other goods had surpluses. Low-quality goods for most,
with wasteful quality for other, wasteful lines
and other search costs. During the Soviet Union
communist period, it was common for women
to spend, on average, two hours of every single day, weekdays and weekends, just lining up
to get consumer goods. Clear loss of gains from trade
and a misallocation of resources. So it was very common
in the Soviet Union to spend lots of resources
producing agricultural products, and then not have the trucks
to bring those products to market. It was common
to be producing radios, have everything you need
to produce the radio, except for one single part
which was in shortage, so you could not produce the radios. Remember the situation
we described for heating oil in the United States
during the 1970s, when in some parts of the country
there was plenty of heating oil? There was enough heating oil so that people were heating
their swimming pools, while in other parts of the country there wasn’t enough and people
were shivering in their homes. Those types of misallocation
of resources were the norm, were normal, were everyday occurrences
in the Soviet Union during its system of communism, or a command economy,
or universal price controls. All of these issues came to affect
an entire economy. In short, what communism did really was a substitution
of planned chaos, a chaotic economic system, instead of having
market coordination. Okay, thanks very much. That will conclude our lectures
on price controls. – [Narrator] If you want
to test yourself, click “Practice Questions,” or if you’re ready to move on,
just click “Next Video.” ♪ [music] ♪

10 thoughts on “Price Controls and Communism

  1. Wow. Is price controls one of the reasons why India has a lot of grains but has no way to distribute them, such that a lot of them rot and go to waste? This is extremely interesting.

  2. You could say that Canadian health care system and the Veterans administration which the prices of all services are set by the state by a central board. Exhibit all of the problem of universal price controls.

    Shortages and surpluses. There are shortages of health care. So when people have a shortage of health care there are waitlists to obtain care. In an emergency situations when there is a shortage of healthcare they drive across the border to American hospitals to obtain the care that they need.

    While at the same time there is a surplus of gender reassignment for surgery transgendered people.

    Wasteful lines and product quality. In Britains NHS there are more staffers than medical staff. There have actually been some hospitals that had no patients and only administrators.

  3. Quite unfortunate that the video calls "Communism" what actually should be called "Socialism" – in fact they even use USSR as example of a "communist economy" when the name of the stuff included "Socialism" – to avoid confusion between a centraly planned economy (Socialism) with an ecomony where nobody owns anything and the market decisions are democratic and decided in the "comunas".

  4. Futures contract – "in the future we will delivery to you X amount of the good stuff at price Y", and thus are future prices set. And to eliminate all but a black market, they make only "the future market" legal, labelling all other trading, ILLEGAL. And that I think is ONE way how the communists will supplant the Free Market. .. Educate yourselves, because most academics are working for the Conspiracy.

  5. They'll either overvalue or undervalue certain commodities because if not then they'll be forced to make profit.

  6. Honestly it's so silly both capitalism and socialism are fine. Communism is even fine on a very, VERY small level. I would have zero issue with a town forcing any business therein to be worker owned, to collectively fund a local medical clinic etc. And if people truly want communism, I assume they'd be willing to open a business or set up a practice in a communist city or county. Social programs, when funded locally, tailored for the community needs, watch dogged locally, implemented locally, can work wonderfully. The problem is when you have to send your money to the belly of the beast, you can't watch dog it because it's too big, you can't track the outcome, you can't tailor it to your community's needs, and it's too hard to scrap a program if it proves unsuccessful. And you certainly will have a hell of a time getting any of your local power back once you give it to the Feds.

    Local focus makes people more socially in tune with one another and more responsible. Federal focus makes people less socially interactive, less responsible, more apathetic etc. because they're just cutting a check rather than being a part of the process.

    In short, LESS power to federal government, MORE power to local government. This is America, we have 50 states, more counties, and even more cities and towns; let's see some diversity in governance style and structure and make America interesting, liberated, and overall the most amazing nation on earth.

    Imagine being able to drive and visit, in one day, a community that's totally communist, or a totally free market community, a hyperconsumerism community, a minimalist community, a community where only used and upcycled things are sold, or a community that's like a miniature version of Norway etc. You could have county or state coalitions that share forests or wetlands and share revenue for that program etc.

    Just less federal control, and more local. We need to end the cronyism and the only way to do so is keep it small and keep it local. ✌🏾️

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