Reductio ad sundecopium

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Easy peasy...
Easy peasy…

Usually, when economists make the case for the futility of price controls, they’ll stress the impossible information problem involved. If it was just a matter of regulating 5 or 10 key commodities, bureaucrats might have a fightin’ chance. But as the number of products to be price-fixed grows, the task facing a Central Planner becomes quickly unmanageable. It isn’t possible for a bureaucracy to know enough about the crazy number of products for sale in a modern economy to reasonably approximate a workable price for each one. Information about the “real” value of a good to society is dispersed through the preferences of millions of people, no bureaucracy can accurately capture that kind of information.

Take a prosaic example: a car. Any given car on the road is made up of tens of thousands of parts (“parts”, in this context, as a mechanic understands the term – swappable bits you can put on and take off if they break.)

The idea that a government bureaucracy can know enough about that many things to price each of them “correctly” is self-evidently ludicrous…and that’s before you even start getting into different makes, model years, parts suppliers, etc…not to mention, y’know, the rest of everything that’s on sale in a modern economy.

Car part pricing is a paradigmatic example of why Central Planning fails. Some part prices will inevitably be priced too high, creating gluts, others inevitably will be set too low leading to…say it with me now…shortages.

And so…guess which product category Sundecop is struggling to fix prices for one by one?

1 COMMENT

  1. I just imagined an Ikea in Venezuela.

    After a month or so of collecting Boxes A, B and C and finally finding D, you finally manage to get the whole thing. And then you go and ask for the little bag with the screws and bolts. “No chamo, you have to go to the sindicato and ask for a permiso de ensamble privado, pay the compensation fee and get your import permit.” “import, ¿cómo así?” “yeah, since all of the metal production has to go to socialist projects you have to import the little screws from Sweden.” “Is there another way?” “Well, you can hire our service of “ensambladores”, they have their own tools and stuff, just call 1-800-ESTO-NO-ES-DE-DIOSDADO, they’ll do it for a fee” “Ah bueno, and how long does it take.” “About 1 month, unless you use our delivery service, then it takes 2 weeks, but you have to pay another fee” “Bueno, coño, how do I do that?” “Just go outside to ‘Transportes Nicolás’ they’ll handle everything”

  2. When this idea was first aired the first item that came to my mind was precisely cars and spare parts. Your are absolutely right: the amount of parts that go into a car is awesome! How can anybody possibly “control” that ? (and its much worse in an economy with walking inflation, so to speak). One basic reason for this preposteorus comedy (read govenment) is that this bunch of clowns has never ever managed anything, and worse yet, nothing that involved their personal worth! It´s so easy to “manage” other people’s investments (public money) when there is no accountability involved!! hch did this lavishly, obsessed, until he realized the country was running out of money because of his arrogance and squandering, and before having to cope with the consequences of his irrationality, he decided to die a heroe, an emblem, a legend… As we say in Venezuela: “El que venga atrás, que arree…”. So he chose nico…

  3. Car and car part shortages? You ain’t seen nuttin yet! It won’t be long now before some chucklehead from ‘Central Planning’ announces the massive purchase of some slightly used Romanian Dacia’s and hundreds of in-storage, but hardly driven, East German Trabants. The versatile Trabant (!), you know, the one with the 2 cycle lawnmower engine wrapped in a plastic/epoxy gooey mix. Central Planning has little doubt that these things can be sold cheaply to an eager and increasingly car-less public. Only one catch. They’ll probably charge $5,000 bucks a piece for the rope-pull and handle needed to start the engine.

  4. I wonder what foreign companies do in order to repatriate their accumulated profits , if they go to CADIVI they get no answer . the tempation will be there to overinvoice import parts which need to be purchased from the offshore parents ( with Cadivi Dollars) and in that way repatriate their profits thus the whole system works as an invitation to falsify costs and charges making the calculation of any product’s cost structure totally unreliable . Human capacity ( and need) to game any external restriction only works to make the whole process more inefficient and costly . the added transactional costs of any control system just makes it perversely produce the opposite of the result sought through such controls. Is there a way arround this conundrum??

  5. The situation on the ground right now is as follows.

    You need a part for your car.
    You go to your local dealer and ask if it’s available.
    In most cases it isn’t – they just shrug.
    If they do have it it’s at a price so high you faint when you hear it.
    Absolutely based on the black market rate + +

    The next place you go are the local parts suppliers that deal in your make.
    The chances are they don’t have it either.
    If you are lucky & they do have it the price is often a little lower than the dealer.but still obviously based on the black market rate.

    The next solution is a website like MercadoLibre where often you will find a entrepreneur who imported 50 knockoff parts from China or somewhere.
    You have to trust that the guy will send you the part from the interior of the country AFTER you have paid him in full and that the part is the correct one.
    Often the prices here are more reasonable but a lot of faith is required.

    Here’s what I believe will happen with this new law.
    The dealers & retail outlets will have less supply then they had last week.
    The government will never control places like ML but you will see a significant increase in the prices there due to the inevitable increase in shortages.
    This whole price control situation is doomed to failure & is being enacted as an election ploy & will quickly be abandoned after December like trying to police exchange controls.

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