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In this chapter, the analysis will be based upon the efforts made by the government to keep the prices of some chosen commodities below their respective market prices. This is always the case especially when the war runs the order of the day but then its retorted that the whole economy is a total war since the government commences to effect the price at a low price even when the reason for marinating the price at its minimal has vanished, that is, when the war is over. When the government sees it fit to put maximum prices to some of the commodities in the country it always applies it to the basic commodities which are usually the essential necessities of life. The calculative move by the government to choose this particular set of commodities comes out of the fact the poor will be protected from unscrupulous kind of businessmen whose major motive is to exploit them and, thus the price ceilings. For instance, having to put a maximum price that could be charged for a pound of beef, it will be reasonably true to state that the poor will be in a position to afford it altogether and it is at this juncture that the need of an individual holds the day rather than individuals’ subsequent purchasing power. Although this argument holds it arguably right to stress that as long as beef distribution is determined by the price it will be certainly impossible to rule out the fact that its need rather purchasing-power that determines its distribution trend (Hazlitt 105-106).
The essence of controlling price by the government is rather an illogical move in the sense that there always are consequences involved which include the following: first, the same government has the dilemma of increasing demand for the product since it is cheaper and people can afford more of it. The second scenario requires the stakeholders to increase the supply of the commodity since people make faster decisions to purchase more and the stock of the aforementioned commodity is perceived running out. In both of these cases, the producer of the commodity is made vulnerable and may close down his operations out of recording consistent losses as in the case during the war when Office of Price Administration ordered slaughterhouses to sell their commodity at a price well below imagination.
It’s wise to note that when there are maximum price ceilings producers of necessities are always discouraged from producing more since their counterparts that produce luxurious goods are never affected at all. It’s also wise to note that in case these producers feel downtrodden then they will go ahead to devise ways of averting the situation which involves rationing whereby consumers are limited to a certain amount of supply for the commodity and are, therefore, expected to possess additional points so as to purchase according to their needs, that is the government adopts a dual currency system. At this juncture the government decides to put controls to the resultant costs of production for commodities so that it smoothly can maintain the rationing. Evidently, when the government commences with this kind of control, it also causes shortages of factors such as labor and materials which are usually used for the production of final product, hence the same government in its effort to maintain a price fix is forced to control prices of other irrelevant commodities leading to a universal-price fixing. Another consequence associated with the move to set a maximum price is the issue of subsidies which is meant to compensate the producers of commodities against closing down their operations. Although this is always the intended case, that is, to protect the producers, the consumers are in fact the ones being protected as they are allowed to enjoy a relatively low price than they are expected to pay for the commodity. The producers, on the other hand, get less than the price they could have fetched in the market. Therefore by not considering rationing of the subsidized commodity, it will definitely mean that individuals with the higher level of purchasing power will almost buy most of the commodities leaving nothing to the needy. On the other end, if rationing is maintained for such a long time that it surpasses the period for which it was intended then it renders the public desperate so that they shift to immediate substitutes. The only possible way for the government to maintain price controls is when it’s in fact able to do away with black markets. The natural phenomenon that could arise in the end is that the government will be the one to decide the amount of quantity that a consumer can purchase as well as the amount of labor and materials that producers could have accessed to and the resultant economy will be nothing more than a totalitarian economy (Hazlitt 106).
All in all, the progress to fix prices by the government is perceived as only thinking about the interests of the citizens as consumers and thereby overlooking their interests as producers on the other hand, plans by the government in session to maintain high prices for commodities is taken to mean that it has interests of its citizens as producers and never as consumers ,either way, the decision to fix prices by the government is a relatively complicated subject which proves chaotic in the minds of its citizens. As prices go up, citizens are made to think that the sitting government is in its routine of exploiting them through payment of high amount of taxes while the resultant lowering of the price will make the producers think that their efforts are being overlooked when they experience high prices for materials, labor and other inputs necessary for production.