As a strapping young economics student in the last century, we studied how prices allocate resources.  If a product has a high price, more people will want to sell it.  Eventually, the new suppliers of that product will provide more than consumers want and will have to start discounting the price in order to sell their inventory.  As profits decrease, the number of people wanting to supply that product decreases, which puts upward pressure on prices.  Eventually, supply and demand for the product will come into equilibrium at some price.  But, what happens when the government sets a ceiling on the price that is below the equilibrium price?  Suppliers quit making the product.  The problem with socialism is that they set prices low enough to win votes, but those prices drive out the suppliers.

With all the bad news drowning us, it is easy to miss the most tragic story of all.  Venezuela is circling the drain, dragging MILLIONS of people down the drain and into chaos.  That nation adopted socialism decades ago.  Today, there are food riots.  Five people were killed just yesterday, fighting for food.  The price of food was been set so low that nobody can afford to provide food to the grocery store, where the shelves are now empty.  Would you grow food if you couldn’t sell it for enough to make a profit?

Prices can allocate resources efficiently when prices can float.  When the government fixes prices, trouble follows, as Venezuela is learning.  This is a lesson that was learned in Russia and China, where they have made considerable progress in deregulating prices.  Maybe, Cuba may yet learn and not succumb to call for artificially low consumer prices, but I doubt it.  Venezuela is already toast!

Socialism comes in many shades of gray.  Not all try to set arbitrarily low prices, but when they do, the government subsidizes the low prices for as long as they can, which is what Venezuela stopped doing.  Hence, food riots!

No government is smart enough to set prices.  Only the “free market” can do that!

But, let’s not be too intellectual about this and lose sight of the human tragedy unfolding for millions of people in Venezuela.  It is a man-made disaster!