What can be done to control the prices of consumer items in the international market?

Question

Higher prices of consumer commodities mostly hit the poor countries more acutely. Therefore, some sort of control will benefit the majority of the people in the world who are poor. Instead of numerous charity works through hundreds of NGOs should not we investigate the possibilities of controlling prices of consumes commodities internationally, since the world is a global city now.

***** Is it possible to evolve a mechanism of susidising on selective basis for countries in need ?

Answer 1

The problem with controlling the economy at an international level is that there is no government to enforce regulations. The UN is comparatively helpless as a law enforcer - the worst it can do is enforce sanctions and that will defeat the spirit of the policies in the first place.

Consumer goods are at an equilibrium level - the price is set by the mechanics of supply and demand. If you were to forcefully low the price somehow, to "benefit" poorer countries, the response would simply be a GLOBAL greater demand. And when demand exceeds supply, they call it a shortage. People with the means to obtain the goods would be the ones in nations with superior infrastructure, and that small stream of supplies to poor countries would dry up. You are right to draw an analogy to a global "city". Drop the price of hamburgers in a city to 2 cents, and see if the poor benefit. Fact is, they probaly would be worse off.

Answer 2

Price controls do not work, except in very rare and highly defined temporary situations.

The problem with price controls is that it ignores what people like and what people want and how that changes.

Lets imagine corn prices were frozen by law at $1 per bushel. If farmers can grow corn below $1 per bushel they will, the ones that cannot will do something else with the land like grow wheat or open a drive-in theater. If the market sets the price at $1 that tells producers what the value of corn is at the current volume sold. They can judge from how the price varies with volume supplied how much they should produce given their costs, if any.

If the law sets the price at $1 producers no longer can determine how much is wanted. If the price is too low, people will eat as much as they can get, but since farmers can make more money elsewhere, there is no corn to eat. They would volunarily pay more, but they cannot because it is illegal.

If it is too high, producers will produce too much, more than anyone wants, and so it will get destroyed.

Finally, price controls tend to impoverish, as counterintuitive as that seems. Because the prices cannot move with actual needs and wants, volume moves with costs. Low cost items get produced by the ton, so much so that you end up with a ton of waste. High cost items do not get produced at all, resulting in shortage. So everyone, rich and poor, ends up with less than what they would voluntarily negotiate with one another for. You either have a shortage, or waste which is destroyed.

The better idea is to make the world more productive, ending poverty entirely.

Answer 3

Price controls inevitably lead to shortages, so in the end, they don't work. And what government body could set the price of any good or service worldwide anyway?