Over the long term, price controls inevitably lead to problems such as shortagesrationingdeterioration of product quality and black markets that arise to supply the price-controlled goods through unofficial channels. One example in the United States is the price controls set on gasoline established during the Nixon administration, which eventually led to major shortages in supply and long, slow lines at gas pumps.
Background[ edit ] Competing theories exist as to the causes of the conditions the General Maximum was intended to ameliorate. Eugene White, in his publication "The French Revolution and the Politics of Government Finance, —", views that years of revolution, international conflicts, and poor climate conditions had led to an economic environment with massive inflation and food shortages throughout France.
Committee members feared new and more radical revolutionaries were being created by the crisis[ citation needed ]. The fear was intensified on 5 Septemberwhen the sans-culottes invaded the National Convention demanding "Food- and to have it, force for the Maximum price regulation.
The Law of Suspects was initially created to deal with counter-revolutionaries, but hunger and poverty were seen by the Committee of Public Safety as dangerous to both the national interest and their positions within the government.
Merchants had to post their maximum rates in a conspicuous location for all consumers to see and were subject to repeated inspections by police and local officials. Furthermore, the law gave legal protection to consumers who reported violations of the Maximum to local officials.
If the consumer did not have a role in the infraction and gave report to the proper authorities denouncing the merchant, fines would be levied against only shop owners. The government continued to function during the economic and political crises by a series of loans, bonds and tax increases; an increasingly large amount of paper money issuance was a vain attempt to stimulate the economy.
This led to continued food shortages and recurring famines throughout the country. The Committee of Public Safety responded by sending soldiers into the countryside to arrest farmers and seize their crops.
This temporarily alleviated the shortages in Paris, however it led to shortages becoming more intense in the rest of the country. The law was written with an eye towards preventing business practices like price gouging and rent seeking, but in practice, the law targeted local shopkeepers, butchers, bakers and farmers, who were already feeling the effects of the economic downturn like other citizens.
The law amplified parts of the problem it was trying to solve. The political and symbolic impact of the General Maximum were clear, as the harsh punishments enacted upon those who breached the Maximum became a symbol of the Reign of Terror.
Princeton University Press,p. The General Maximum in Montauban.The General Maximum Price Regulation was issued on April 28, , by.
the Office of Price Administration as an emergency measure to prevent, insofar as possible, further price increases dur. Price controls are government-mandated legal minimum or maximum prices set for specified goods, usually implemented as a means of direct economic intervention to manage the affordability of.
o f prices for many commodities for a considerable period, the regulation was a major influence in stabilizing the cost of living as well as industrial prices during the war. The General Maximum, or Law of the Maximum, was a law during the French Revolution, as an extension of the Law of Suspects on 29 September It succeeded the 4 May loi du maximum that also set price limits, deterred price gouging, and allowed for the continued flow of .
However, the problem is that a maximum price may lead to shortages, queues and a black market. Maximum price of Max P leads to shortage – demand (Q2) greater than supply (Q1) Very inelastic supply.
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The General Maximum, or Law of the Maximum, was a law during the French Revolution, as an extension of the Law of Suspects on 29 September It succeeded the 4 May loi du maximum that also set price limits, deterred price gouging, and allowed for the continued flow of . Price controls are government-mandated legal minimum or maximum prices set for specified goods, usually implemented as a means of direct economic intervention to manage the affordability of. Price regulation / restrictions Tejvan Pettinger October 8, economics Readers question: Please tell me some products for which equilibrium price is not favourable for some producers and consumers which invite the state to impose price restriction.
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