Aside from the arrogance of
believing she is an expert in what prices should look like, there are two
incredibly stupid flaws with her plan.
First, if the government forces food
prices down in the name of "fairness" to consumers, it will cause food suppliers
to reduce output. This is because if prices are below the direct and opportunity
cost of supplying these goods, it would be irrational to continue to supply.
Second, if prices are driven down artificially, consumers will try to buy more.
The combination of reduced output and greater purchasing attempts will cause
shortages. Just like in Venezuela. Just like when Nixon did this in the early
1970's. Just like in the former Soviet Union.
Why propose something so
economically idiotic then?
When Richard Nixon came out with his plan to freeze
food prices the voters were so happy that he was re-elected in a landslide.
That
is because the vast majority of voters are economically ignorant. So, if voters
want low prices and they are ignorant about where prices come from, it makes
perfect POLITICAL sense to propose price controls.
And that is why she did it.
Afterall, she can't actually believe price ceilings will work.....
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