- Marginal Revolution University looks at communism as a system of universal system of price control.
- Under communism, or a command economy, this is exactly what occurs.
- As a result, all the effects of price controls become amplified: there are even more shortages or surpluses of goods, lower product quality, longer lines and more search costs, more losses in gains from trade, and more misallocation of resources.
- As we have seen, universal price controls destroy market coordination and create a system of planned chaos in which it becomes more difficult for consumers to get the goods and services they want and need.
- In communist societies, everything is controlled by the government. This means there is a system of government price control as the price of all goods is controlled by the government.
- A single price control can have bad effects.
- Important effects of price control (ceilings and floors):
- Shortages and surpluses
- Reductions in product quality/wasteful quality
- Wasteful lines and other search costs
- A loss in gains from trade
- A misallocation of resources
- Communism, a command economy, can be thought of as a system of universal price controls.
- Substitution of “planned” chaos for market coordination.
Further Reading:
The Wealth of Nations by Adam Smith
Chapter XV. ‘The Market’ in Human Action by Ludwig Von Mises.
Man, Economy and State by Murray Rothbard.
Basic Economics: A Common Sense Guide to the Economy by Thomas Sowell.
Power and Market by Murray Rothbard.
The Corn Laws Speech of Richard Cobden.
Economic Freedom and Interventionism by Ludwig Von Mises
Free Trade and other Fundamental Doctrines of the Manchester School edited by Francis W. Hirst (1820).
Part Six. Chapter XXX ‘Interference with the Structure of Prices’, Chapter XXVII ‘The Government and The Market’ in Human Action by Ludwig Von Mises.