Should the government control the price of food and gasoline? The move is controversial.

(CNN Business) –– People are paying a higher price for food, gasoline, cars, and services. And inflation is not over yet, as the pandemic continues to hit the economy. So should governments consider fixing the cost of essential goods for consumers?

It has been done before, typically during times of crisis. But for most mainstream economists, the answer to this question is a resounding “no.” They argue that limiting how much companies can charge will distort markets, causing shortages and exacerbating supply chain problems, while only temporarily reducing inflation.

“Price controls, of course, can drive costs, but they are a terrible idea,” said David Autor, an economics professor at the Massachusetts Institute of Technology (MIT), In a survey published the University of Chicago earlier this month.

Asked whether implementing price controls similar to those used in the United States during the 1970s could reduce inflation over the next year, fewer than a quarter of economists surveyed agreed. By comparison, nearly 60% said they disagree or strongly disagree.

“Just stop. Seriously,” Austan Goolsbee, a professor at the University of Chicago, responded to the question. Goolsbee previously served as chairman of former President Barack Obama’s Council of Economic Advisers.

The attitude toward price controls appears to be similar in Washington. There, politicians showed little enthusiasm for even specific or temporary measures, despite growing pressure on middle-class families who suffer from price increases more than the wealthy.

Still, with inflation at 7% — a four-decade high — and midterm elections looming, price controls could figure into future discussions about how to bring prices down. Especially if the measures that the Federal Reserve will take this year fail to control inflation.

The problem with price controls

Price controls can be targeted or imposed on a wide range of goods, setting a minimum or maximum. For example, Berlin, the capital of Germany, has tried to limit the amount of rent that landlords can charge tenants. In Britain, regulators control how much consumers can be charged for energy and some types of rail fares.

Economists skeptical of price controls often point to basic economic concepts.

They argue that capping prices encourages companies to produce less of a product, while making it more attractive to consumers. Supply goes down and demand goes up, leading to scarcity as the inevitable result.

But that doesn’t stop governments around the world from resorting to price controls when inflation spirals out of control. As elections approached late last year in Argentina and annual inflation exceeded 50%, the government froze the cost of more than 1,000 household items.

Last week, Hungarian Prime Minister Viktor Orban said he would cut the price of flour, sugar, sunflower oil, milk, pork leg and chicken breast, just before the national elections in April, according to Reuters. It also extended the maximums to energy, fuel and mortgages.

Isabella Weber, an assistant professor of economics at the University of Massachusetts Amherst, argues that price controls also have a role to play in the United States. Precisely, he points out, when politicians try to address the inflation caused by the extraordinary circumstances of the pandemic.

“Price controls would buy time to deal with bottlenecks that will continue as long as the pandemic prevails,” Weber recently wrote in The Guardian. And he added that “the cost of waiting for inflation to disappear is high.” A key to making the policy a success, he wrote, is to phase out price caps to avoid rapidly rising costs.

Free market or price control?

There are many precedents for price controls in the United States… But you have to go back a few decades.

The last time they were implemented at the federal level was during the 1970s, when then-President Richard Nixon established a Cost of Living Council in the summer of 1971 and blocked most wage and price increases for 90 days. The policy was popular with the American public, and inflation temporarily slowed after reaching 5.8% in 1970.

But Nixon’s subsequent efforts to limit prices were far less successful. The Republican repeatedly tried to freeze costs over the next few years, but inflation rose to 11% in 1974, exacerbated by the Organization of the Petroleum Exporting Countries (OPEC) declaring an embargo on oil shipments to the United States the year before. .

Nixon had earlier in his career worked as a lawyer for the Office of Pricing Administration, which was established during World War II to impose cost caps on rents and a wide range of products. Price controls were largely effective. But they also gave rise to a thriving black market. The agency was dissolved in 1947.

Limited price controls are also implemented in the US economy today. Some cities limit rents or the amount landlords can increase each year, while government agencies control the price some monopoly utilities charge.

Modern politicians tend to trust the Federal Reserve’s ability to control inflation. However, the central bank may struggle to deal with price increases stemming from supply chain issues as a result of the pandemic.

President Joe Biden also took some steps to combat rising prices, targeting corporations and using the power of his office. He has vowed to enforce antitrust laws and crack down on price-fixing by meat processors, a sector that is controlled by just a handful of large companies. Biden also released oil from the country’s Strategic Petroleum Reserves, in a bid to lower energy prices. Meat and energy contribute significantly to inflation.

Price controls, it seems, are still quite a drastic measure.