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Abolishing price control law serves business and consumers better

I refer to The Star article ‘Gov’t mulls abolishing law after requests by businesses’ dated July 15, 2016.

I welcome the government’s decision to look into the possibility of abolishing the Price Control and Anti Profiteering Act 2011 and acknowledging the fact that in the free market system there should be freedom given to businesses and consumers to decide the pricing.

Price controls or government-imposed price controls, be they price ceilings or price floors (such as minimum wages) - blind us to the full range of reality that we would see and respond to absent such controls. Price controls distort and restrict our vision. They misrepresent reality.

For example, in 2014 it was reported that the people in rural parts of interior Sarawak had been hit by a sudden shortage of fuel and essential food items like sugar, cooking oil, flour and rice especially in Ulu Baram.

Whatever supplies that were left, they were sold at very high prices. There were some distributors bringing in these goods from Miri and selling them to rural longhouses at very high prices, sometimes several ringgit more or almost double than the current price in Miri.

I also heard that were some problems with the transportation that is causing this chaotic situation.

Why did that happen? Because as free market economic suggests, the quantity supplied falls if price control makes its production and delivering unprofitable or simple less than average profitability especially marginal producers and entrepreneurs in the field - whether go out of business or operate in smaller scale that eventually affect the people in highest demand i.e rural areas.

Those people who transporting the items on their own without government subsidies, they were profit seekers entrepreneurs in area that were not affected by the shortages. In anticipation of profit, they redirected their supplies from unaffected areas toward places like Ulu Baram, Miri where most desperately needed.

Of course in this case, rural folk had to pay more for the items. At least, with higher prices they still can buy and consume the items. At least, those entrepreneurs did something by bringing much needed items to rural folk, right?

Imagine a father of five starving children is approached by an entrepreneur who informs the father that if he wishes, he will sell to him a 5kg rice for RM30.

A moment later, a group of enforcement officers show up and supposedly to protect the interest of the father (e.g consumer), they instruct the entrepreneur to cease and desist this practice of higher pricing.

Unless the entrepreneur sells to the father at one fixed price for all items, the entrepreneur must not offer the father anything.

So, unable to to afford the supply such as beras and other items at fixed prices, the entrepreneur leaves the area, giving the father nothing!

Misguided to blame ‘greedy entrepreneurs’

If anyone insists on blaming rising prices on greed and demand for government action to prosecute ‘greedy entrepreneurs’ for ripping off the rural folk, then he or she is misguided.

Why? One, higher prices merely reflected the reality that these necessary items were made more scarce by price control. Prosecuting those entrepreneurs would make the necessary items more costly to acquire.

Two, consumers in the affected area who are even more greedy than greedy entrepreneurs should be blamed for rising prices.

They were willing to pay much higher prices so when they bought the necessary items, and then complain about the greed of entrepreneurs and demand government action, that I think doesn’t make any sense.

If they were not willing to pay, the prices of the necessary items would not rise. If so, why do people insist on prosecuting only the entrepreneurs?

The government also need to prosecute every rural person who was willing to pay much higher prices!


MEDECCI LINEIL is with the Institute for Leadership and Development Studies, a new think-tank established to promote alternative policies and nationhood practice based on the market system.

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