Price controls

[2][3][4][5] The Roman Emperor Diocletian tried to set maximum prices for all commodities in the late 3rd century AD but with little success.

[6] During the French Revolution, the Law of the Maximum set price limits on the sale of food and other staples.

It allowed the government to begin a process to scrutinise rising levels of wages (then around 8% per year) by initiating reports and inquiries and ultimately giving orders for a standstill.

In 1971, President Richard Nixon issued Executive Order 11615 (pursuant to the Economic Stabilization Act of 1970), imposing a 90-day freeze on wages and prices.

[citation needed] According to Girish Gupta from The Guardian, price controls have created a scarcity of basic goods and made black markets flourish under President Nicolás Maduro.

[20] In Sri Lanka, the Consumer Affairs Authority has the power to set the Maximum Retail Price (MRP) for goods specified by the government as essential commodities.

[21] In 2021 the Sri Lankan government enacted price controls on several essential items resulting in shortages.

Governments use price ceilings to protect consumers from conditions that could make commodities prohibitively expensive.

[25] Further problems can occur if a government sets unrealistic price ceilings, causing business failures, stock crashes, or even economic crises.

[26] For example, Lactantius wrote that Diocletian "by various taxes, he had made all things exceedingly expensive, attempted by a law to limit their prices.

Then much blood [of merchants] was shed for trifles, men were afraid to offer anything for sale, and the scarcity became more excessive and grievous than ever.

Until, in the end, the [price limit] law, after having proved destructive to many people, was from mere necessity abolished.

The rationing and price controls enforced in many countries during World War II encouraged widespread black market activity.

[28] One source of black-market meat under wartime rationing was by farmers declaring fewer domestic animal births to the Ministry of Food than actually happened.

A classic example of how price controls cause shortages was during the Arab oil embargo between October 19, 1973, and March 17, 1974.

[32] Stagflation was eventually ended in the United States when the Federal Reserve under chairman Paul Volcker raised interest rates to unusually high levels.