Price control? Not again!

How is it even possible for anyone to take a step into the past while taking a step into the future?

At the annual conference by Sustainable Development Policy Institute, Asad Umar recently said that digital economy is vital for sustainable development – a view that he has echoed many times before. A few days later, everyone finds out that Tania Aidrus, ex-Google executive, is to lead PM Khan’s Digital Pakistan Initiative. His counterpart in Q-Block in the meanwhile comes up with the genius idea to go back to the outdated executive magistracy to control food price inflation.

The actual quote reported by the media is: “we are in talks with the federating units to revive the old system (of executive magistracy) to check hoarding and price hike." This would be a step back on two accounts.

First: executive magistracy has already been deemed unconstitutional by the Supreme Court and was abandoned under the court's directive. And second: controlling price hike is another word for price control, which is also a thing of the past.

Hoarding should indeed be checked, but it can be checked by other means such as having an effective local government system and also by reducing information asymmetry, improving consumer awareness, fixing the market incentive structure, production efficiency and so forth. This is where Digital Pakistan Initiative can help amid an overhauled framework for competition, consumer protection, value chain infrastructure, and enforcement of contracts.

The Prime Minister would do well to bear in mind that there was no price control in Riyasat-e-Madina. That and a humble recognition of the fact that Pakistan’s state cannot even deliver on the basics such as provision of law, order, safety, collection of taxes. Yet the state is trying to imagine itself as all-knowing and all-seeing to be able to control prices. Does the state have the knowledge of all the factors that lead to price discovery at different space and time? If the answer is no, then price control for “controlling price hike” will only do more damage to the economy as has been the case in dairy and pharmaceutical sectors for example.