Mandatory pricing is one of the obsolete methods of controlling inflation, said Mehrad Ebad, a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture, in a write-up for the chamber’s news portal. A translation of the full text follows:
A relic of old centuries, pricing hurts the business environment. Pundits believe it lays the foundation of successive developments. In general, mandatory pricing in Iran and other countries has not helped achieve the goals of policymakers, and at the same time, given rise to menacing market reactions, News.tccim.ir reported.
For example, we have seen declines in the supply of products following the implementation of pricing policies. Or, in competitive markets, products are being sold at prices below the guild-mandated rates, leading to the formation of informal markets. Informal markets allow sales without value added tax and make competition difficult for reputable businesses.
After trial and error regarding pricing, the policymaker has probably realized that this method does not result in cheap distribution of goods and services; on the contrary, it is a travesty of justice. On various occasions, government-mandated prices have led to instability in the industry. The concepts of brand, quality or advantages of goods are often ignored in pricing.
On the other hand, mandatory pricing ignores market mechanism that must determine the price of goods through supply and demand. Advocates of pricing should know that it is impossible to reduce prices through punitive policies, or by insisting on increasing production.
The industry has been struggling with the decline in domestic and foreign investments for several years now. In the new Iranian year (started March 21), the government began to reform the forex policy under the name of economic surgery. However, economists believe that the main surgery is to get rid of mandatory pricing of all goods and allowing market mechanism and people to determine the prices.
