Some actions by governments simply make economists weep bitter tears of frustration -- price controls on basic foodstuffs are one of those. But rather than wave my supply and demand curves around again, here are a couple of little stories from history.

We all know the story of how Marie Antoinette, when the peasants were rioting about the supply of bread, announced “let them eat cake.” Of course, they cut her head off for that -- except she didn't actually say it. It's a line from a play about her. But it's also an excellent comment on what happens with price controls. France had price controls on basic bread -- which, at the time, was the basic foodstuff -- in the same way that rice was not too long ago here. No bread, no food, that sort of basic foodstuff. 

But the price of grain with which to make bread was not controlled -- nor were the retail prices of the other things that could be made with the same grain -- like brioche. So, if grain prices went up, bakers simply stopped making the basic bread and only made the price-uncontrolled luxury goods like brioche. Which is also why Marie's line is actually “let them eat brioche.” Because, despite the high price of grain, that was plentiful -- because the price was uncontrolled. 

Now, if you think this is just a line from a play, arepas is a corn-flour bread and a vital part of the Venezuelan diet. In recent years they controlled the retail price of arepas -- it is a basic foodstuff. So the bakers didn't make them, they did make all the other breads and cakes you can make with corn-flour though. To the point that the Venezuelan government -- never the sharpest knives in the drawer -- tried to insist that each baker must make a particular amount of arepas each day.

That way madness lies. 

September 16 saw the 34th anniversary of Happy Yeltsin Supermarket Day. This commemorates when Boris Yeltsin (not then, or yet, president of Russia) visited an American supermarket. Nothing special, just a little local place. It is said that Yeltsin, on the plane to his next stop, wept bitter tears at what idiot communism had done to the Russian people. Once he did gain power, he abolished food price controls and rationing -- I was living and working there at the time, in Moscow, and suddenly there was food everywhere. The winter before beetroot -- no, really, beetroot -- had been rationed and then all this food came tumbling out of the inefficiencies of the distribution system. It was there all along -- it was just badly priced and so not valued. 

There was also a story about this time, the British economist Paul Seabright was part of a group welcoming Moscow officials to London. To show how a free market food system worked and so on. He was asked, in all seriousness: “Who is in charge of the bread supply for London?” The Russian officials could see there was bread everywhere, fresh, of many different types, and so on. Therefore there must be some super-bureaucrat getting the plan right. If they could copy that they'd be able to solve that Russian problem. They really could not believe that the reason it all worked was because there was no plan. There were many different, competing, plans by bakers and supermarkets and grain millers, and so on -- all coordinated by prices. No one in charge, no plan, just free markets getting on with things.  

One final little memoir: My wife's office in Moscow was just behind Lubyanka, the HQ of the KGB. There was a store there, one of those special ones for those with the right job, the right privileges in the Soviet system. Upon that abolition of price controls and rations it made a deal with Tesco -- yes, the mid-range British supermarket -- and the quality and variety of the produce climbed considerably, We used to shop there. That's how bad government control of food prices and distribution is -- the special store for the secret police is improved by becoming a mid-range corner store from a free market nation.

I still recall a trip around that time. From Moscow to the US, I was in Boulder for a couple of days, badly jet lagged. Wandering around at 4am, all the bars closed, so into the local King Soopers store I went. I can still see, in my mind's eye, those acres of shelving stretching away into the distance. I'd lived in the US before, I knew what the place was like -- but a couple of years in Moscow by then had sensitized me to that cornucopia again. Just astonishing how that base problem, getting enough food to eat, has been solved by capitalist free markets.

From this very newspaper: “Visiting kitchen markets three days after the government introduced price caps on potatoes, eggs, and onions, the Dhaka Tribune found that not only were the directives entirely ignored, some places were selling these basic food essentials at a higher price.” We've tried this experiment. We know the answers here. Yet governments still, on and on, keep doing what we know is wrong -- they institute price caps.

Now do you get the idea behind those bitter tears of frustration from the economists -- as with Boris on his airplane?
 

Tim Worstall is a senior fellow at the Adam Smith Institute in London.