The history of price regulation is a tale of woe

Michael Giberson

I suppose it is still true that, as Raymond de Roover wrote in 1958, “The history of price regulation remains to be written….”  The full sentence and several more (emphasis added):

The history of price regulation remains to be written, but we know it to be a tale of woe. In the absence of a well-organized system of allocation and rationing, price controls were bound to break down, and it is not surprising that previous to 1800 their administration was often haphazard, vexatious, inefficient, and arbitrary. A crude form of rationing, common all over Europe, was to freeze the price of bread but to vary the size of the loaf with the price of breadstuffs. As the latter increased, the penny or twopenny loaf became smaller and smaller. Price fixing usually made matters worse instead of better and inevitably led to the emergence of a black market and widespread concealment of available stocks.

De Roover’s paper is primarily concerned to clarify medieval doctrines on the idea of a “just price.” The dominant conception in the 1950s (and still common, I think, but this is outside my area of competence to judge) was that medieval writers primarily favored the notion that a just cost was one which would adequately cover the producers cost of production. De Roover counters that the more widespread view at the time tended to see the “just price” as that price which would prevail in an open market.

However, while honoring market prices as just (so long as no element of dishonesty or force is involved) medieval writers were also willing to deem a price set by law as just, “unless the regulations were manifestly out of date or openly disobeyed, with the authorities making no attempt at enforcement.” And even writers preferring to link “just prices” to the price of an open market made allowances for local government interference to, say, keep the price of bread and other staples low.

While the technology of rationing is much improved relative to medieval days, it seems obvious enough that price controls continue to break, and their administration remains “often haphazard, vexatious, inefficient, and arbitrary.”

LINK: Raymond de Roover, “The Concept of the Just Price: Theory and Economic Policy,” The Journal of Economic History, Vol. 18, No. 4 (Dec., 1958), pp. 418-434.

2 thoughts on “The history of price regulation is a tale of woe

  1. I think people’s conceptions of the “just price” for something changes a lot less than the price in an efficient competitive market. If I could get something for $2 yesterday and today it costs $3, then $2 is the just price. It wouldn’t surprise me if it were a bit self-serving as well; a buyer will regard a lower price as just than a seller.

  2. It is true that actual prices acquire a kind of normative aspect such that deviations from them can seem wrong, particularly as you indicate, deviations that make them worse off. See Sarah Maxwell’s book, The Price is Wrong, for discussion of this and many other things that can cause consumers to feel wronged by prices (and the merchants that offer them).

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