Are Price Controls Moral and Practical? Essay Example

Price control is a political issue that has been argued for a long time. In order to further understanding the nature of price control, we will take rent control and minimum wage as examples, combined with egoism, predation and altruism to analyze consequences and long-term influences of price control.

When talking about rent control, economists believe that rent control is unnecessary and immoral. They think that controlling rent prices will cause loss-loss situations. When the government forces the rent price to go down, landlords will lose their potential profit, in other words, government will force landlords to sacrifice their profit to help tenants. This may probably give landlords an incentive to decrease maintenance or the budget for other management fees to again maximum their short-term profits. For instance, a landlord may choose to hire fewer maintenance workers, in order to pay fewer salaries. Tenants will then need to wait a long time to get their living problems fixed. Plus, it will accelerate buildings to wear out, decreasing the quality of the rental apartment, and making building less desirable because of a lack in proper care. Otherwise, some landlords may try to sell their properties or real estates, and then invest in another more profitable business. Therefore, for a long-term prospect, both landlords and tenants will suffer a loss. On the other hand, economists believe that a standard situation, without rent control, is more reliable and acceptable. They insist that landlords and tenants are equally self-responsible agents. It is a tenant’s responsibility to find a way to pay the rent. They typically negotiate the rent price and always voluntarily to sign the leasing contract. It is a win-win situation, because landlords get money by renting their properties, and buyers have a comfortable place to live in. Thus, it is egoism and a moral situation.  Also, economists agree that the supply-demand diagram of apartment rentals in the free market will settle the price automatically. Without price control, when demand exceeds supply, rental price will go up; consequently, less people will be able to afford higher rent price. Thus, demand will go down.

Minimum wage is another example of price control- which is defined as minimum labor cost that worker should receive under the law. Governors work diligently at ensuring all workers can enjoy a minimum level of wages, salaries, and living standard.  However, 90 percent of economists consider this policy to be immoral and impractical. Thinking about minimum wage as a price floor, usually one job position has numbers of candidates and employers any way have to pay a minimum wage. As a result of non-price competition, highly educated or experienced workers are more appreciated; this makes it even harder for younger, unskilled people to find a job. Thus, the rate of unemployment will go up. Even worse, with minimum wage, employers may seek other ways to decrease costs. Employers may reduce employee’s benefit, lay off workers, go out of business, or to find cheap laborers in another region or country. On the other hand, although employees have increased income, they may spend more money. As a result, they will be in the same financial situation. Plus, economists believe that government should treat people as adult rather than children; they should respect self-responsibility. Employers offering money benefits and employees offering labor, voluntarily enter into this partnership mutually.

From my point of view, I think price controls are moral and practical. Although it may result in a loss-loss situation, what if there is no rent control or minimum? We live in a limited space with expensive real estate. The majority of people cannot afford to buy a house or do not have enough credit to apply for a mortgage. Therefore we have fewer rentals available, especially, because to build upward buildings are expensive. In a free market, when supply is less than demand, prices usually go up. Landlords will definitely raise their prices to obtain higher profits, even if tenants are passive to accept. In this situation landlords take advantage of tenants, who are a relatively poor party. This is called predation. Landlords will win and tenants will lose. Based on the above situations, I agree that the government has obligations to protect the weaker from the stronger because people are greedy. They will never stop raising price if they can, so government has the right to override the unequal bargaining power.  The most efficient way to handle this is price control- to set a price ceiling for rental price or a price floor of wages. This will force landlords to be altruistic, to sacrifice their interests, and help tenants to find a place to live that is affordable to their budget, and to force employers to pay minimum price to ensure workers’ living standards. I know it sounds immoral for the landlord, but I agree that the stronger, the richer, the more powerful person has obligations to sacrifice if necessary for the weaker, the poorer, and will efficiently decrease the rate of homelessness, too. Also, I agree that economist thinks price control may result in a loss-loss situation; however, I think the loss-loss consequences may be avoided by adjusting the price control level more frequently. For instance, government needs to evaluate minimum wages and rent price more often based on economic status, geographical location, and employment rate. In addition, I believe price control does help people in different ways to help families to reduce tax burden, to give employment incentive, and to help business budget. With price control, people will have more money to spend because of less rental fees and minimum wage paid. This will stimulate the economy. Moreover, if people spend more, then businesses get more profit and need to hire more employees to meet their increased sales. This will increase employment rate. I understand that price control has advantages and disadvantages. Price control may result in a bad situation in the long run, but I am confident that government will come up with better solutions to minimize the bad effects of price control.