Price freezes – now the Russians have a go

Price freezes – now the Russians have a go<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Do price freezes ever work in keeping inflation under control in the medium term? I am just about old enough to remember the mid 1970s and the long lamented “Minister for Prices and Consumer Protection” Mrs Shirley Williams – introducing price freezes in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK during those years of high and volatile inflation. Indeed the memories are coming flooding back. There were “price freeze” stickers on countless shop door frontages.

But price freezes distort the working of the price mechanism.

This BBC article covers the latest attempt at price controls introduced in Russia http://news.bbc.co.uk/1/hi/world/europe/7060691.stm

‘Russia‘s largest food producers have signed an agreement with the government in Moscow to freeze prices on a range of basic foodstuffs. The agreement, due to run until the end of January next year, is aimed at curbing high food inflation hitting millions of low-income families. It has been criticised by some economists as a throwback to Soviet-style central planning.’ Looks more of a political calculation to me than a credible and carefully thought out policy.