Price controls may look attractive, but costs often only emerge later: PM Wong
Consumers may benefit from price controls initially, but over time, suppliers may have less incentive to produce or invest, says the prime minister.
Prime Minister Lawrence Wong warned that price controls, while initially beneficial to consumers, can lead to reduced production and investment by suppliers over time. Speaking at the Economist Service's 25th anniversary dinner, Wong cited examples of rent controls discouraging the supply of rental units and food price caps causing shortages.
Wong, who is also Finance Minister, highlighted additional fiscal burdens, potential investments moving elsewhere, and individuals finding ways to circumvent the rules. Wong emphasized the importance of correctly diagnosing problems, understanding incentives, recognizing costs and trade-offs, and considering second- and third-order consequences when intervening in markets.
He urged economists to uphold discipline in policymaking, citing the need to speak up when analysis points to uncomfortable conclusions.
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