The Debate Over Price Controls on Basic Needs in the United States

The ongoing discussion around price controls on basic human needs, such as housing, energy, and pharmaceuticals, is a complex one. On one side, there are those who argue that excessive control disrupts the market and leads to shortages, while on the other, there are advocates who believe that such measures are necessary to ensure access to essential services for all citizens.

The Case Against Price Controls

Those who oppose price controls often cite historical examples of how such measures can backfire. For instance, in New York City, strict rent control laws have resulted in a significant number of apartments being left un-rentable. The low rent rates make them non-profitable for landlords, who, as a result, simply choose not to rent them.

Similarly, in California, price controls on electricity led to the utilities going bankrupt, as they couldn't sustain their operations due to the low rates. This situation led to rolling blackouts, severely impacting the quality of life for residents. Venezuela provides another example, where widespread price controls on food led to severe shortages and a subsequent collapse in supply.

The Case for Price Controls

On the other hand, proponents of price controls argue that such measures can address critical social issues. Nikolaos raises the point that a reasonable profit margin should be enforced on goods sold to the public, particularly in sectors impacting the most vulnerable. This approach, while potentially disruptive, can help reduce inflation and alleviate poverty.

For instance, during Nixon's era, price controls did not yield the desired results. However, more targeted and managed approaches, such as those seen in Australia, have shown promise. Australia's Pharmaceutical Benefits Scheme (PBS) provides a framework where the government can influence drug prices by refusing to subsidize those deemed to be overly expensive.

Step-by-Step Government Intervention

Austrlia's PBS provides a model for addressing pharmaceutical pricing in a controlled manner. The program works as follows:

The government compiles a list of drugs it will subsidize, which increases their attractiveness to patients and boosts sales for suppliers. The government examines the proposed prices by suppliers and prevents inclusion on the list if they are deemed to be using "price gouging" tactics. Companies can choose to join the list based on their economic assessments. The PBAC assesses the proposed price for listing and can deny inclusion until the price is reduced or use is restricted to a particular patient sub-group. The government and manufacturer formally agree on the price before listing on the PBS, and the terms of risk-sharing arrangements are defined.

Global Comparison: Insulin Prices in 2023

Take insulin prices as an example. A comparison of prices in 2023 reveals stark differences. While the price in Australia is set through government intervention, the U.S. price was recently capped at $35. This cap, coupled with the overall lower list prices in Australia, highlights the effectiveness of such measures.

Note: The comparison indicates a strong price control outcome even without traditional controls, emphasizing the importance of regulatory intervention in pharmaceutical pricing.

A Balancing Act: Government Duty of Care

Regardless of the approach, the primary goal should be to balance the need for access to essential services with the sustainability of businesses providing these services. Governments have a duty of care to their citizens, and ensuring the best use of public money while not bankrupting essential service providers is crucial.

Conclusion

While price controls can have adverse effects and lead to shortages, more targeted and managed approaches, such as those illustrated by Australia's PBS, can lead to more equitable pricing and access to essential services. The key is to strike a balance that supports both public welfare and private sector sustainability.