PRICE, FIXATION

Gisborne Times, Volume LXXX, Issue 12201, 13 March 1934, Page 3

PRICE, FIXATION

: A THORNY SUBJECT... ‘ ‘ ■LS IT A GOVERNMENT ‘ ;'' ' 1 ' ■' FUNCTION? ’ •’ ' ; .. AUSTRALIA’S DECISION. (Special to the Times.) . ; " 1 WELLINGTON, March 10.' 1 'The commendably frank public statement by • the Minister of Indusand Commerce fliot there is t° lid no Government fixation of petrol prices under the Motor Spirits Act, rnay have been partly prompted by •the moral effect created by The hasty legislation of Parliament • in the'matter, which latter has conceivably encouraged the idea ' of Government price fixation in respect of other commodities' (lays a statement by tlio Associated Chambers of Commerce.) Not oulv’ did 'the Minister"mention the administrative , difficulties surrounding fixation of petrol • prices, but he also' had sensible regard to the fault that the fixing of a price for any one commodity would naturally lead to an agitation for the fixation of prices of a number of other eonimodotie:. for different reasons. In jt'hts regard, there is the case *°J’ Government fixation of minimum prices in the interests of producers and for Government fixation of maximum prices in the interests of consumers. NOT A SIMPLE PROBLEM. Government fixation of .prices K Ol1 * orally i s 'not as simple as it may appear on. the surface, hut i:> a thorny subject. Official operations in the field provided by such an extreme form of Government interference in business would cause havoc. Most economists consider Government price fixation to he both fundamentally wrong in principle and doomed to failure in practice, and experience has' borne this out. In tho matter of Government fixation of maximum prices, in the interests of consumers, there is the recent example of Australia. Aa au instance, when price fixation was unundartaken in Australia during the war, the State fixed the pries for bread in Western Australia at a figure that would have entailed balling at a lo:.is, so the bakers of one town suspended operations and were about to leavo when the inhabitants actually induced the Government to increase the 'regulation price. This ivu;» an.extreme case, but the pricefixing authorities soon found that after existing stocks haj been exhausted by the increased demand created, private business eou’d not provide further supplies at the mi * economic prices fixed. Consequently the fixed prices had Co be 1 increased to their natural level, and the result was as if price fixation had never been. ‘‘EXPERIENCE DISASTROUS.” The price of a commodity, ol course, i v made by the buying public under the law of supply and demand, and Australian experience sliowcd that Government fixation ot maximum prices had little effect <:u the cost of living, and that the increase in the cost of food was just as great in those cities in which price-fixing ’legislation «wa« rigorously administered as in those where trade was virtually unregulated. Tn 1916 the then Minister of Agriculture in file State of Victoria (Hon. F. Hagelthorn) said : "I can only say that the experience of all Governments who have tried pricefixing Inis: been disastrous. The very recent experience of the Australian States has not resulted in the benefits- that the sponsors uF price fixing hoped would bo obtained, and certainly injifry in many directions has followed. After a -short experience the (Victorian) Ministry arrived at. the conclusion that price-fixing was nnuecessa'rv.”

With' regard ' to Government fixation of minimum prices in the interests of producer?/, where ihe|re is a competitive supply," exactly ' the same trouble arises in fixing minimum prices higher than those determined by supply and demand as arises in fixing maximum prices at a level below that which would, otherwise obtain. "Where in the one case there would he too few seller* for the demand, in the ease of minimum prices there would be too many sellers. Prices 'and values would be prevented from falling naturally as> a result of the increase in supply, and the result would be chaotic.