Can Anyone Control Prices?

A friend sent me this article and suggested that I'm wrong in claiming that no one can control prices. I agree with him. Prices can be controlled through a variety of mechanisms, perhaps especially through government subsidies. To put it differently, there are a number of factors that can obscure the true cost of a good or service, and these obfuscations ultimately affect the final price that a consumer pays.

I think the better way to say what I've tried to convey is: you can try to control prices at one level (retail, for example), but you can never control the true cost of everything that contributes to the price, let alone the complex motivations that incline a buyer to pay anything for a particular good or service; and therefore, ultimately, you can't control prices. When a primary market's pricing gets sufficiently bent out of shape for a long enough time, perhaps creating a shortage of a desired good (think Levi's in the USSR), black and grey markets will form in an attempt to meet demand.

Whether government subsidizes the activities of oil companies, sugar farmers, or dairy producers, ultimately they're collecting funds from taxpayers to bestow benefits on a relatively small group of favored people and businesses. This arrangement is criminal immoral abhorrent sub-optimal. It underscores the difference between "pro-business" (a position that tends to favor those established businesses who have developed enough clout to effectively use government as a cudgel against would-be upstart competitors) and being "pro-market" (which maintains that competition in an open and free marketplace of goods, services, and ideas will tend to leave all market participants (i.e. "buyers" and "sellers") better off, and will create natural incentives for businesses to excel at pleasing their customers (profit) and disincentives for failing at this task (losses)). A functional market provides for profits and losses. Government intervention often has the effect of protecting profits for entrenched entities, and sheltering the same from the losses they would naturally incur in an unprotected market.

That's my take, anyway.

Tyler Cowen, of course, puts it much more succinctly in this must-read post: The laws of economics have not yet been repealed.