Tea & Hoppers – Fixed Prices, perverse incentives [Podcast]

By Anushka Wijesinha In my latest podcast, I talk about tea and hoppers; two of my favourite food items, and indeed of most Sri Lankans. But the government now dictates how much shops can charge me for these – and its a pretty fantastic, lower price than ever before – milk tea at Rs 25, plain tea at Rs. 10, and plain hoppers at Rs. 10. As a consumer, I should be pretty happy right? “Not if it’s causing unintended consequences!”, the economist inside me is saying. In this article titled ‘ The Problems of Price Controls ‘, The Cato Institute – a prominent libertarian think tank in the US, asserts that, “price controls reduce quality, create black markets, and stimulate costly rationing”. We are seeing this play out right here in Sri Lanka.