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Econ 100A

14 November 2022

Prompt #6

Does the US government influence the prices of things too much, too little, or just about enough?

            When the government chooses to influence pricing, the impact on the economy can be severe. As such, it is generally recommended that government avoids this practice, called price controls. The use and implementation of price controls can provide temporary highs within the economy, but the resulting fallout can be extremely detrimental.

            In the current economic climate rife with unemployment, there can be subsequent concerns from the general public to be able to afford basic necessities. With such difficulties in mind, the US government may feel the need to impose price controls that help citizens and increase faith in the governmental and economic systems. It is understood that price controls can ensure accessibility, assure production companies, limit shortages, and prevent price gouging - the latter a factor that was seen during the most recent worldwide pandemic. While price controls can be externally viewed as a win for all, the long-term effects can be detrimental. With pricing floors restricted, consumers may purchase increasing numbers of certain products, which may overwhelm distributors and producers. As such, a shortage may actually occur, depending on how long the price controls remain in place.

            With the most recent pandemic, the interest in the US government implementing price controls rose significantly. After careful consideration, the government elected not to employ full-scale price controls as has been enacted several times over history. Decisions on price controls were relegated to a state level, although considerable examination was given to price gouging. The government’s decision to support the country in other areas as opposed to utilizing price controls prevented additional detrimental effects, as it was analyzed that a purported dip in the economy would not be able to stabilize the subsequent effects of price controls. As supply chains were already impacted by the spread of the virus, any increased demand resulting from price controls would have created: severe hardship for the producers and distributors, overwhelming disappointment for consumers, and increased pressure on the transportation industry. Additionally, the supply chain concerns created insurmountable concerns that the accessibility of goods was in question, where price controls traditionally ensure availability. The government’s choice to avoid price controls alleviated a core inability to provide the inherent systematic staples of such an economic impact.

            As such, the decision to avoid these problems by not enacting price controls during the pandemic was sound. In a time period awash with concerns, the choice to refrain from price controls demonstrates good judgment on the part of the government and supports the idea that the government influences pricing “just enough.” The past has shown that price controls are traditionally held for worldwide impact concerns, such as wars; and, while the pandemic was certainly a global cause for panic, the US government analyzed the economic impact and chose to focus on tenets that could be enhanced despite rising country concern. In general, increasing economic control could negatively affect consumer goodwill, despite increasing revenue for distributors and producers. Conversely, completely refraining from any economic controls such as wages and rent could create a society that is untenable for both consumers and companies. Since microeconomics influences policy, businesses, and independent decisions, the US government is wise to continue endeavors to maintain an even and measured role.