Ministers celebrate historic reductions in the official price of bread, meat and milk, while supermarkets report a minor technical problem involving the continued existence of food
LONDON - The government has announced a historic victory over food inflation after introducing price controls that have successfully reduced the cost of groceries consumers can no longer find.
Bread is affordable. Milk is affordable. Meat is affordable. Fresh vegetables are remarkably affordable. The shelves, unfortunately, are empty. Ministers insist the absence of groceries should not overshadow the achievement of making groceries cheaper.
"This is the most affordable supermarket in British history," announced our imaginary Minister for Consumer Equality, Nigel Basket. A reporter asked whether any products remained available for purchase.
"That is a separate performance indicator."
The minister then unveiled a ceremonial shopping basket containing photographs of sausages, theoretical butter and a government voucher promising the future availability of potatoes. He described the achievement as a major step towards food justice. The customers, meanwhile, were eating biscuits they had bought before the programme began.
Socialist Government Makes Groceries Affordable???
- The cheapest bread in Britain is the bread that doesn't exist. It is also the freshest.
- A five-star supermarket with nothing for sale is the first shop in history that can't be accused of overcharging, shoplifting or having any customers.
- Boris has done more for supply and demand than any economics lecture, and he has never needed a whiteboard.
- Selling a tractor at 70 percent of its cost is the only government policy that a farmer can follow once.
- When the queue becomes the economy, the person at the front is the local Chancellor.
Price Controls and Supply: The Government Discovers That Prices and Products Are Different Things
The first principle of theoretical grocery socialism is straightforward. People dislike high prices. Politicians promise lower prices. The government orders businesses to charge less. Everybody celebrates until producers start looking at the cost of maintaining supply.
Anyone who wants to see what is really happening to food prices in Britain can look at the Office for National Statistics inflation and price indices, which publishes the figures without a ceremonial basket. Now consider a farmer who spends £1 producing an item the government requires him to sell for 70 pence. Without a compensating subsidy, efficiency gain or other adjustment, every sale creates a loss. Producing more does not fix that. It enlarges the loss. As the Econlib entry on price controls explains, price ceilings tend to cause shortages, because when the price system stops doing the rationing, queues, evasion and black markets step in.
An imaginary farming minister has condemned farmers for refusing to join in with enthusiasm. "These people are obsessed with making money." Asked whether farmers need money to buy seed, fertiliser, fuel, machinery and feed, the minister said such considerations showed an alarming attachment to the profit motive.
An angry farmer offered to sell the minister a tractor for 70 percent of its production cost. The minister accepted immediately. The farmer then explained that he could not manufacture a tractor under those conditions.
"Then why did you offer it?"
"I was following the government's economic model."
A junior official was sent to find out why milk had stopped arriving and came back four days later holding a diagram that involved a cow, a lorry, a refrigeration engineer, a man named Geoff and the entire global market for diesel. Leonard Read covered this ground in I, Pencil, which shows that nobody on earth knows how to make a pencil alone, never mind a pint of semi-skimmed. The official's diagram has been classified. Geoff has been invited to explain himself.
Empty Supermarket Shelves: The Revolutionary Supermarket Has No Need for Inventory
Government inspectors recently visited a supermarket taking part in the National Affordable Food Programme. Every shelf carried an officially approved price. Butter was 50 pence. A dozen eggs cost £1. A loaf of bread was 20 pence. The inspectors were delighted. None of the products were available.
The supermarket manager explained that suppliers had cut deliveries because the mandated retail prices could not reliably cover their costs. The inspectors accused him of failing to show enough commitment to affordability. He suggested they try buying something. They couldn't. The officials nevertheless gave the supermarket five stars for compliance, and the manager asked whether the award could be exchanged for bread. It could not.
A customer complained that prices are irrelevant if nothing is available. The ministry replied at once. "We reject the suggestion that empty shelves are a problem. They demonstrate that our commitment to low prices has created extraordinary demand."
János Kornai and the Economics of Shortage: He Had Already Seen the Movie
None of this is new. The Hungarian economist János Kornai examined the chronic shortages that marked many centrally planned socialist economies. When official prices and bureaucratic allocation failed to match supply and demand, consumers made up the difference with queues, informal markets and personal connections. Michael Ellman's study of Kornai's work in the Cambridge Journal of Economics describes how planners' own decisions helped preserve shortages, so that goods could be officially affordable and still persistently hard to get.
Theoretical socialism regards waiting in a queue as a form of social equality. Everybody stands together. Everybody suffers the same inconvenience. Everybody has an equal chance of finding out the shop has run out of chicken thirty seconds before their turn.
The queue develops its own economy. People trade places. Relatives hold positions. Strangers swap tips on which shops might get a delivery. Eventually the whole population becomes exceptionally skilled at locating products the government insists are universally available. Economists call this resource misallocation. Ordinary people call it Tuesday.
The Black Market Has Been Declared Illegal for Knowing Where the Milk Is
A mysterious entrepreneur named Boris has emerged as the country's most successful unofficial grocer. Boris knows which farms have eggs. He knows which warehouses hold coffee. He has somehow discovered where the government has stored the butter. He sells all of it at prices well above the official rates.
Consumers grumble about Boris's prices while carrying on buying from him, because Boris has a revolutionary competitive advantage. He has the merchandise.
The government has condemned Boris as an exploiter. Boris says he is merely supplying what customers want. The ministry replies that nobody should profit from shortages, and Boris asks why the government keeps creating conditions in which shortages are profitable. The ministry announces an investigation. Boris sells the investigators six pounds of butter.
None of this is merely a seminar topic. Human Rights Watch documented what years of controls, shortages and collapsing supply did to ordinary Venezuelans in its report on Venezuela's humanitarian emergency, which records severe shortages of food and medicine and the hunger that followed. Our ministers have read the summary and remain upbeat. Britain, they point out, has better weather for queuing, and a far richer tradition of not complaining while doing it.
Food Subsidies Versus Price Controls: Free Food Isn't Free if the Farmer Isn't Paid
Of course, not every food subsidy or temporary price intervention produces empty shelves. Policy design matters. Governments can give targeted financial help to struggling households, support vulnerable consumers and step in during extraordinary disruptions. Markets can fail too, and concentrated suppliers can exploit weak competition.
But none of that abolishes the need for farmers to produce, processors to operate and retailers to keep goods in stock. The distinction is between helping citizens afford food and destroying the incentives needed to supply it. A government that subsidises meals must finance the subsidy. A government that controls prices must consider production costs. A government that promises unlimited food cannot assume unlimited agricultural output. These constraints remain stubbornly indifferent to ministerial enthusiasm.
Supermarket Crisis Officially Solved
At the final press conference, the minister announced that supermarket inflation had fallen to zero. He showed a chart of historically low official prices and congratulated the government for ensuring that no citizen would ever again suffer the indignity of expensive bread.
A journalist asked what ordinary families should eat. The minister pointed at the chart.
"Prices have never been lower."
"But there isn't any bread."
"Then consumers should take advantage of our affordable rice."
"There isn't any rice either."
"Potatoes?"
"No."
"Milk?"
"No."
The minister looked concerned. "Well, at least nobody can accuse us of allowing food prices to rise."
The government then announced that food queues would be renamed Community Nutrition Participation Events, and that citizens would receive a certificate for attending. Unfortunately, certificates cannot be fried.
Theoretical socialism has now made dinner affordable for everybody who doesn't need to eat it.
Humorous Observations on Price Controls and the Empty Supermarket
- A certificate of attendance at a Community Nutrition Participation Event is the least filling document ever printed.
- "A separate performance indicator" is a lovely phrase. It means "the bit we didn't measure."
- Ministers are brilliant at lowering prices and hopeless at lowering the lunch bill they claim on expenses.
- Every empty shelf has a ministry somewhere, proudly holding a chart with a downward arrow.
- If affordability was measured by availability, the government's food policy would be the most expensive thing in Britain.
- A ceremonial basket of photographs is the only shopping that cannot be rained on, burned or eaten.
- The investigators who bought butter from Boris reported the transaction as "inconclusive but delicious."
- Geoff has kept the nation in milk for nineteen years. The ministry discovered him on a Tuesday and had him under investigation by Thursday.
- A classified diagram of a cow is the most sensitive document in Whitehall, chiefly because it works.
- "Better weather for queuing" is the first government food policy to depend entirely on drizzle.
Satirical Disclaimer
This article exaggerates the risks of badly designed price controls, particularly in heavily directed economies. Not every subsidy, emergency intervention or price regulation produces shortages. All conversations, named officials and grocery incidents are comic devices. The story is entirely a human collaboration between two sentient beings: the world's oldest tenured professor and a philosophy major turned dairy farmer, both of whom insist that cows must be fed before milk can be distributed.
SOURCE: https://academic.oup.com/cje/article/45/2/371/6067266
Auf Wiedersehen, amigo!
- prat.UK https://prat.uk/?p=51416
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