Price Regulation

The act of controlling prices by artificially setting prices or pricing movements.

Price regulation is the opposite of Supply and Demand.

What is Price Regulation?

Price regulation involves a government, supplier or other agency directly setting prices instead of letting free market forces dictate them. Price regulation usually only works well over a short term as long term manipulation on a large scale upsets the balance of market economics, and can lead to shortages or oversupply. Communist pricing control in some countries have previously led to massive waste due to the over-supply of certain goods while others starved in their millions due to the lack of food. The Supply and Demand model creates a balance that meets the needs of communities more accurately thus minimising wastage and shortages, while providing for increased production when demand increases.

Why does Price Regulation Fail?

The universe is an uncertain place. It has been proven mathematically that nothing can be predicted with absolute certainty. Control only lasts for brief moments in time before small factors turn into large influences and a tipping point turns certainty into chaos. This is the natural order. No amount of planning will alter this reality. On one hand it is unfortunate, but on the other hand it is fortunate that we now know about it and can plan around upcoming cycles. Try and ignore it and events like the Global Financial Crisis will remind us, and human nature assures us that it won't be the last time.