Life Imitates Econ, and Vice Versa: Zimbabwe Price Controls

In Econ 202 (Principles of Micro), we've discussed what is wrong with price ceilings at various times this semester.  Some folks, on ethical grounds, support government's cutting of prices so that those who can't afford the good at market-clearing prices can have a shot at buying the good.  But by forcing the price down, government does little more than ensuring "the poor" will have less access to price-controlled goods, and Zimbabwe is a sad, sad example (HT to John Chilton at the Emirates Economist):

"There are too many data gaps," the Central Statistical Office's Moffat Nyoni told state media.

Many staple goods are often absent from shop shelves after the government ordered prices to be halved or frozen in a bid to stem galloping inflation.

Why is there less on the market?  Simple: firms can't cover the marginal cost of production by selling in Zimbabwe:

Maize meal, bread, meat, cooking oil, sugar and other basic goods used to measure inflation largely disappeared from shops after Robert Mugabe's government ordered prices to be slashed.

Manufacturers have said they cannot afford to sell goods at below the cost of producing them.

JC has more here.

Comments

[Chance]

Here's a question. Now, I'm conservative/libertarian, so I'm not big on the welfare thing. However, what if Zimbabwe left the prices alone, but yet provided assistance to those who could not afford groceries. Or would that still cause problems? It seems that a freer market with more welfare is better than a regulated market with less welfare. Or are both pretty bad?

[Phil]

Neither are good solutions, but given a choice, I'd take the former choice.