China Coal Shortage: Real Problem with Price Fixing

I ran across this article which highlights a real problem with price fixing.  Let me quote from the article itself:

BEIJING (AP) — Chinese power plants are running out of coal, with less than a three-day supply in some areas, the government said Tuesday, adding to China’s logistical headaches following a devastating earthquake.

It is the second time in three months that Chinese power plants have run short of coal, an unintended effect of government-mandated price controls — a throwback to communist central planning — to shield the public from rising global energy costs.

Beware of price ceilings!  Shortages are real problems that actually happen when governments decide to fix prices.  Let’s hope we do not forget this, especially with rising food and fuel costs.  Fixing prices at some arbitrary high point would cause shortages.  If high prices cause this much headache and turmoil, what would a large-scale food or gas shortage do?  What would happen if electricity, gas, or food was simply not available, at any price?

I don’t mean to be an alarmist, but I do want to make it clear that when we start monkeying around with the pricing mechanism, as recent Senate and House grillings of oil executives have hinted we are headed towards, there is a real danger of these type of effects.

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Filed under Austrian Economics, Libertarian, politics, role of government

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