Conep details reasons why Price Control is not an effective solution

The National Council of Private Enterprise (CoNEP) held a Forum last Tuesday, with the aim of showing what effects price control can have on the country’s economy and what ideologies exist behind it. Under the name “Price regulation and cultural battle”, it featured a presentation by the Chilean political scientist, lawyer and writer Axel Kaiser and the participation of leading figures from the private sector.


During his participation, the expert explained that it is important to understand how pricing is composed in order to understand why it is not positive to carry it out. “High demand raises prices, which in turn increases production because it is more profitable than producing other things. In this way, resources of the economy are reallocated to produce more of what is most urgent. Calling for price freezes is not understanding anything of economy and worsen what is sought to be improved,” he said.


The price is set by the market, with the actors that participate in it and by the supply and demand of the products. Determining one that is below the real costs implies several consequences: that the economic agents that participate in the chain cannot sustain it, that they do not see it as attractive and that the demand grows without having a suitable supply. This leads to shortages.


“The ideology behind price controls is that there are people who hoard, who take advantage and that is why we have to regulate the price and that is how we are helping people. However, price fixing ends up worsening the quality of life much more than it is intended to improve, ”she limited and then mentioned examples in countries such as Venezuela, Argentina and even Chile.


For his part, the president of CoNEP, Rubén Castillo Gill, assured: “Private companies understand that price control is not the right way to get through the crisis. But not because it causes an economic loss for certain sectors, but because it has been shown in practice that it is a formula that only brings scarcity and delays”.


“The solutions that have been given to reduce poverty are not healthy, the problems that price controls are supposed to solve are not solved that way. The effort must be in producing quality employment, and companies and entrepreneurs are fundamental actors to achieve it”, added the president.