Why can’t the government just set a concrete price for everything (Rent, groceries, etc) and forbid it from ever changing? That would prevent inflation from ever happening, right?
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Governments have used price controls in the past. It often leads to shortages and black markets.
Can you really not see any challenges with that concept at all? Cost of raw materials would be an obvious place to start. And every govt in the world would have to agree lest you just start importing from elsewhere. No pay rises ever even after becoming much more skilled at your job. No motivation for competition to provide better quality or lower cost. It makes no sense whatsoever.
The problem with price caps (which is effectively what you’re describing) is that price increases are the result of demand outstripping supply. If you cap the price, often the result is that you run out of the thing you’re controlling. Once that starts to happen, you get black markets; why would I sell my loaves of bread for the government mandated $2 when I could instead sell them on a street corner for $5?
The other thing is that inflation isn’t universally bad. The government tries to maintain a couple percent inflation per year. Inflation is good for people who borrow money, and helps drive people to invest their money, which is good for the economy. You don’t want to completely squash inflation, just like you don’t want to let it grow out of control.
There are other ways to slow inflation besides price caps. Take money out of the economy by taxing the rich (you may have to tax them more to get the same economic effects you would by taxing the poor, but hey, they can afford it). Increase the supply of goods by reducing tariffs and building housing. Increase interest rates (which can reduce employment rates; maybe use the money you’re getting from those taxes to bolster the social safety net?). Experiment with principles from modern monetary theory. There are a lot of things you can try to combat the negative effects of inflation.
It would also create a lack of innovation. Why make a better blender when you can only charge x amount. You would just end up having crappier and crappier products as the manufacturers use cheaper materials.
Sure, but then it causes shortages. High prices are both a disincentive for consumers to consume things, and an incentive for producers to produce things. For instance, high gas prices can make people choose more fuel efficient cars. They can also make certain costly forms of oil extraction profitable. These are both good for supply.
I buy milk by the quart because I rarely need more than that and it costs $2.00. If it cost $.25 a quart, now I might end up getting a gallon and more milk ends up getting consumed (read: spoiled). Except now you have millions of people doing this…*where’s all the extra milk going to come from*? The answer…nowhere. Milk is going to sell out and you won’t be able to find it.
Because they would have to apply a price to absolutely everything everything and Private sales between individuals. It’s impossible. The value of the dollar is not just based on five or six product categories.
The government doesn’t own the means of production so they can’t set the price. Unless the government just takes over the economy it doesn’t work and the government taking over the economy didn’t work so well for the USSR
Inflation is what happens when people spend more money. Since there’s no new stuff to buy, the shelves get wiped clean. To account for this, businesses raise prices.
So if we fix the price too low, then the economy becomes limited by how fast we can make something, and if we fix the price too high then people complain that the price is too high and corporations walk away with a ton of easy money.
Capitalism is based on the premise that competing companies provide better quality products for lower prices, and the consumer decides what to buy. The idea is that competition forces companies to maintain good standards and fair prices, leading to a healthy economy.
What really happens is companies produce shit and sell it with good marketing, but that’s the idea.
I have a feeling if the federal government attempted to do that it would in some way subvert federalism and dual sovereignty. Arguably, one could argue this was in some way tied to the power congress has under the commerce clause but it would still be incredibly difficult and there would be several constitutional hoops they would have to jump through when writing it.
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