Regulating prices is (almost always) a bad idea

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High prices commonly lead to an attempt to control them through regulation. This remedy, while tempting, is rarely a suitable solution. Rather, price controls tend to aggravate problems before they fix them. Paradoxically, even in the face of abundant evidence and repeated examples of failure, some consumers feel protected by this type of measure even though it almost always ends up harming them.

Indeed, markets are not perfect, and sometimes it is necessary to intervene in them. But price control is not the only, nor the best, possible intervention.

Inflated prices are only the symptom and not the cause of the problem (a problem that does not go away or is resolved by setting prices). Therefore, a successful intervention must always start by finding out the reasons why the market is not working effectively and then take measures that directly address these specific causes. Measures that work include eliminating barriers to promote the entry of more competitors, sanctioning those who carry out monopolistic practices, and amending regulations that limit the ability to compete aggressively.

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