CNN floating the idea of price controls

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People are paying a lot more for food, gas, cars and services, and inflation isn't over yet as the pandemic continues to distort the economy. So should governments consider setting the price of essential goods? It's been done before, typically during times of crisis, but for most mainstream economists, the answer to this question is a resounding "no." Limiting how much companies can charge will distort markets, they argue, causing shortages and exacerbating supply chain problems while only temporarily reducing inflation. "Price controls can of course control prices — but they're a terrible idea," David Autor, a professor of economics at the Massachusetts Institute of Technology, remarked in a survey published earlier this month by the University of Chicago…. Still, with annual inflation running at a four-decade high of 7% and midterm elections approaching, price controls could feature in future debates about how to reduce prices, particularly if actions taken this year by the Federal Reserve fail to tame inflation. Price controls can be targeted or imposed on a broad range of goods, setting either a floor or ceiling. The German capital of Berlin, for example, has sought to limit how much rent landlords can charge tenants. In the United Kingdom, regulators limit how much consumers can be charged for energy and some types of rail fares. Economists who are skeptical of price controls often point to basic economic concepts. They argue that capping prices encourages companies to produce less of a product, while making it more attractive to consumers. Supply goes down, and demand goes up, with shortages being the inevitable result. But that doesn't stop governments around the world from resorting to price controls when inflation gets out of hand. As elections approached late last year in Argentina and annual inflation topped 50%, the government froze the price of over 1,000 household goods. Price controls would buy time to deal with bottlenecks that will continue as long as the pandemic prevails," Weber wrote recently in The Guardian, adding that "the cost of waiting for inflation to go away is high." One key to making the policy a success, she wrote, is to remove price caps gradually to prevent a rapid surge in prices.

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