Korean Job Discussion Forums

[mindmetoo]

http://news.yahoo.com/s/nm/20071112/wl_nm/venezuela_food_dc_1

Price controls. Your neighbor has oodles of cash. You want some of that. So you'll raise the price on milk. But the government won't let you. So there's no point in selling milk when you can sell him Scotch or a BMW for what the market will bear.

[Pluto]

We studied something similar to this in one of my classes the other day. It was during the oil crisis in the late 70s. The government enacted price ceilings on gasoline. There were lines a mile long at six in the morning at many gas stations because the supply wasn�t there. Furthermore, some shady gas merchants tried to dilute the product with water to make an extra dollar. I can only wonder what some milk suppliers in Venezuela are doing now. It's a sad truth but many people will become ill I fear.
Lesson learned; markets always equilibrate, no matter how powerful a government may be.

[Ya-ta Boy]

Thomas Friedman makes a point in "The Earth is Flat" that one of the 'worst' things that can happen to a country is to discover a vast and lucrative natural resource, like oil, because it allows the government to side-step the hard choices of developing education and infrastructure. I think he over-stated it a bit, but not by much. Venezuela is a good example.

[mindmetoo]