A concerned Malaysian writes about Malaysian affairs. "You are the Change you Seek" Barack Obama

Thursday, January 24, 2008

Government Can Only Control Prices at Our Cost...

The latest decision by the authorities to operate food stock-piles shows that the price control mechanisms we have are not working well.

But they have now created another committee to ensure that prices of essential goods are controlled.

As I am a follower of Milton Friedman's "Free to Choose" doctrine, I oppose all steps to control the market and the government should let market forces determine the price. Putting in more bureaucracy to control prices creates an inefficient market and ultimately the consumer ends up paying more for everything.

By fixing prices of so many items, it creates only a mirage that inflation is under control and I would imagine that the CPI used in Malaysia contains mainly the price controlled items so that there is some "Feel Good" factor.

Allowing prices to rise to market levels will force the consumer to find alternatives and the market will adjust automatically.
Without price controls and licence requirements, more players will enter the market to meet demand.

Having stockpiles will cost a lot of money and wastages and that cost will be borne by consumers. There was a recent article in Malaysia Today about how the company that is the sole importer of rice was caught with bringing in tonnes of rice above the authorised limits. That is what happens with a monopoly.

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