Nov 17, 2014

Proposed law: Vegetable prices to be regulated

Prices on vegetables might get cheaper, even though it is shmitta year..

The Ministerial Legislative Committee approved a law proposal by which prices of fruit and vegetables will be regulated by the government, a move which is expected to save the average household between 300 and 600 shekels (per month? per year?).

Supposedly in the past 6 years, fruit and vegetable prices in Israel have increased by 30%, while the average increase in other countries has been only 12%.

The law will be prepared to go before the Knesset for voting.
source: NRG

If they regulate prices, I assume it will include  prices during the shmitta year. I would also like to see them regulate quality, as the quality of the "yevul nochri" produce is really lousy, and considering it is either the same price as previous years or even more expensive, it is a big loss for the consumer.

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  1. There's this funny thing about price regulated products... they tend to DISAPPEAR. Let me give you an example... before Shabbos, go around RBS and try to find a price regulated challah. For some strange reason the bakers don't want to make and sell challah for NIS 3, below cost, when they can make them for NIS 9 and make a nice profit. So the cheap style disappears (and it would be, say, NIS 5 if allowed to be sold at a profit).

    While there is too much price gouging, price controls are very dangerous. For an example, see what's happening in Venezuela, where you can't find toilet paper anymore (price controlled), or detergent, or diapers.

    "Toilet paper, rice and coffee have long been missing from stores, as Venezuelan president blames CIA plot for chronic shortages." "With the situation here people abandoned the fields," says Jesús López, in reference to government-seized land that sits idle. "Empty shelves and no one to explain why a rich country has no food."

    No one in Venezuela can understand that the state removed the profit motive and required businesses to produce at below cost... and both the employees (no motive to work) and the businesses (no money to operate after all spent to produce at a loss) can no longer produce. Oops.

    So while we need some protections, price controls tend to distort and destroy. Best avoided.

  2. Akiva is correct but doesn't take his thought far enough. Politicians turn to price controls as their "go to" position when they want to give the appearance of doing something for the people but they don't really know how a national economy works. Israel has a newsman running the treasury who has yet to carry through on most positions he espouses; a soldier and inventor as economic and trade minister more enamored with international affairs and the looming elections for PM than fixing the economy; the head of the national bank who appears sheepish, unwilling or unable to confront know nothings in leadership; and a PM who once was a gutsy finance minister who cared about domestic policy. Now the PM can't see enough of himself on the world stage and at state dinners ignoring a faltering economy and the financial plight of his people. Price controls are like rearranging the deck chairs on the Titanic. Like Napoleon said, "In politics, stupidity is not a handicap."


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