Should we control prices and implement administered prices to resolve issues of inflation or income or satisfy all the needs of the population? Administered prices are prices decreed and managed by the public authority in place of the market and the mechanism of supply and demand.
Generally, administered prices under total control are reminiscent of communist, centralized, planned economies, as in the USSR and in the Eastern countries before the fall of the Berlin Wall, but they are also common in liberal economies.
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In France, since the emblematic decree of 1978 which authorized bakers to freely set the price of bread and croissants, it was the year 1986, with the end of regulated and administered prices, which truly established the economy of market: “Ordinance 45-1483 of 1945 is repealed. The prices of goods, products and services are freely determined by competition. »
Economic challenge
However, they still exist as tools for socio-economic policy, democratization, regulation of conditions of access to goods, action on behavior or response to power struggles between social actors.
Administered prices, whether directly or not, are generally set upstream of transactions; they are far removed from market equilibrium and competitive conditions, in order to make certain essential goods accessible (medicines, education, transport). ; their development can be supervised or controlled (rents). They can take the form of capped prices (electricity) or floor prices (SMIC) or even subsidies (agriculture).
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Prices under administrative influence are both an issue for purchasing power and an economic challenge in an open liberal economy, because when they are very far from the real conditions of a market, they lead to dysfunctions: shortages (housing ), overconsumption (health, medicines); inefficient and pernicious incentives for businesses (price barrier to entry, little innovation or investment).
