An Economist Faces Price Controls

I need to take a break from writing on soccer and try to speak about applied economics for a while. A few days ago, the legislature in Kenya passed a bill that is intended to introduce price controls on a number of essential goods. With tremendous support in the Kenyan parliament, the argument was that traders charge high prices for essential commodities such as sugar, wheat, corn and cooking oil and therefore intervention through price controls would ensure that these prices remain affordable to a number of Kenyan citizens.

To start with, it is true that a majority of Kenyan citizens are extremely poor and it is understandable that legislators in Kenya who earn some of the highest wages in PPP terms should be concerned for their welfare. What worries me is whether a legislature comprised of some professionals are unable to read either history or the most basic texts in economics. Kenya has had a two decade experience with price controls that were suspended in the early 1990s and yet the country's citizens were none the richer for that. In fact, the general shortages of those same essential goods was pervasive and drove corruption and black markets in those goods.  

So i wonder why the Kenyan legislature assumes that new rice controls will yield better results today and in the future. It is just clear that this new law will be subverted both by traders and the bureaucrats who are being asked to enforce it because the Treasury is reluctant to perform that role. A second factor that offers some hope is that Kenya's president, Mwai Kibaki, is a student of economics and should proceed to  veto that bill without apologies.  I am sure that he is quite familiar with the arguments cogently presented by Lawrence Reed here.