Price Controls and Communism
-
Not Synced- We conclude our discussion of price
controls by talking about price controls -
Not Syncedand communism or planned economy. This
will be brief because the idea is pretty -
Not Syncedsimple. We've already looked at all the
effects of price controls in different -
Not Syncedmarkets. But we can think about communism
as being in some ways a system of -
Not Synceduniversal price control. Everything is
controlled by the government. The price of -
Not Syncedall goods is controlled by the government.
So, if a single price control can have bad -
Not Syncedeffects, what happens when you control the
prices of all goods? Let's take a look. -
Not SyncedLet's just remind ourselves of some of the
important effects of price controls, both -
Not Syncedceilings and floors: shortages and
surpluses depending upon whether we have -
Not Syncedthe price below the market price or the
floor above the market price. Reductions -
Not Syncedin product quality or sometimes too much
quality, too much waste. Wasteful lines -
Not Syncedand other search costs. Loss in gains from
trade and misallocation of resources. -
Not SyncedNow, communism, a command economy, can be
thought of as a system of universal price -
Not Syncedcontrols, price controls on all goods. And
we saw exactly these five elements -
Not Syncedoccurring in countries which had universal
price controls, such as the Soviet Union. -
Not SyncedIt was common for some goods to be in
shortage while other goods had surpluses. -
Not SyncedLow-quality goods for most, with wasteful
quality for other, -
Not Syncedwasteful lines and other search costs.
-
Not SyncedDuring the Soviet Union Communist period,
it was common for women to spend, on -
Not Syncedaverage, two hours of every single day,
weekdays and weekends, just lining up to -
Not Syncedget consumer goods. Clear loss of gains
from trade and a misallocation of -
Not Syncedresources. So it was very common
in the Soviet Union -
Not Syncedto spend lots of
resources producing agricultural products, -
Not Syncedand then not have the trucks to bring
those products to market. -
Not SyncedIt was common to be producing radios, have
everything you need to produce the radio -
Not Syncedexcept for one single part, which was in
shortage. So you could not produce the -
Not Syncedradios. Remember the
situation we described for -
Not Syncedheating oil in the United
States during the 1970s -
Not Syncedwhen in some parts of the country there
was plenty of heating oil. There was -
Not Syncedenough heating oil so that people were
heating their swimming pools while in -
Not Syncedother parts of the country there wasn't
enough and people were shivering in their -
Not Syncedhomes. Those types of misallocation of
resources were the norm, were normal, were -
Not Syncedeveryday occurrences in the Soviet Union
during its system of communism, or a -
Not Syncedcommand economy,
or universal price controls. -
Not SyncedAll of these issues came to affect an
entire economy. In short, what communism -
Not Synceddid really was a substitution of planned
chaos, a chaotic economic system, instead -
Not Syncedof having market coordination. Okay,
thanks very much. -
Not SyncedThat will conclude our
lectures on price controls. -
Not SyncedIf you want to test yourself, click
Practice Questions -
Not Syncedor if you're ready to move on,
just click Next Video.
- Title:
- Price Controls and Communism
- Description:
-
What happens when the prices of all goods are controlled? Under communism, or a command economy, this is exactly what occurs. As a result, all of the effects of price controls become amplified: there are even more shortages or surpluses of goods, lower product quality, longer lines and more search costs, more losses in gains from trade, and more misallocation of resources. As we have seen, universal price controls destroy market coordination and create a system of planned chaos in which it becomes more difficult for consumers to get the goods and services they want and need.
Microeconomics Course: http://mruniversity.com/courses/principles-economics-microeconomicsAsk a question about the video:mruniversity.com/courses/principles-economics-microeconomics/price-controls-communism-planned-economy#QandA
Next video: http://mruniversity.com/courses/principles-economics-microeconomics/trade-specialization-economics-globalization
- Video Language:
- English
- Team:
- Marginal Revolution University
- Project:
- Micro
- Duration:
- 03:35
Theresa Ranft edited English subtitles for Price Controls and Communism | ||
Theresa Ranft edited English subtitles for Price Controls and Communism | ||
Theresa Ranft edited English subtitles for Price Controls and Communism | ||
Theresa Ranft edited English subtitles for Price Controls and Communism | ||
Theresa Ranft edited English subtitles for Price Controls and Communism | ||
Theresa Ranft edited English subtitles for Price Controls and Communism | ||
MRU2 edited English subtitles for Price Controls and Communism | ||
MRU2 edited English subtitles for Price Controls and Communism |