You can often hear about directive pricing. This is what economy uses its services? And what features does this pricing mechanism have?
general information
Directive pricing is an approach in which the price is dictated to the seller by the state. And this must be done. Otherwise, a corresponding reaction awaits, which can begin with fines and end with prison and confiscation of goods. The system of directive pricing is possible not only with the total transfer of wealth into the hands of the state, but also under classical capitalism, although in somewhat different forms and for ordinary citizens of our country. But anyway, power over the economic sector gets into their own hands bureaucracy bureaucracy. The introduction of this mechanism into action, as a rule, is caused by good impulses. But not everything is as rainbow-proof as you want. Do not forget where the well-paved road leads. And if the mechanism is inadequately implemented, only the worsening of the existing situation can be achieved.
By the way, when is directive pricing used? The type of economic system in which it is most popular is planned economy.
Principles and methods
In practice, it is not uncommon, when the formation of prices occurs even before the production begins to be produced. This is possible due to the fact that production costs are taken as a base. One of the consequences of this directive pricing is that the market can have an extremely weak effect on the dynamics and price level. In this case, the degree of demand for the proposed goods is fixed. This can also be seen in market pricing, when demand far exceeds the supply.
The role of the state
As has been said before, directive pricing is a mechanism that can be implemented only if there is planning from the side of the state. Under classical capitalism, the state can regulate prices only for a certain range of services and goods. But in relation to the general situation, it can only determine the general rules and establish certain limits (for example, the marginal level of profitability). The only exception to this is the regulation of the actions of enterprises that occupy a monopoly position in the market. In this case, the state can start a dialogue to find a compromise in the matter of reducing the price, as well as collect penalties and impose sanctions. Also, various mechanisms can be created on the part of the government, which are aimed at shaping and developing the stipulated and necessary economic and social priorities.
What is more profitable?
Which option is better? Market pricing or directive? What are their pros and cons? To say that one of them is certainly a good choice, it is impossible. Let's consider the following situation: there is a prosperous state that lives in peacetime. In such a case, so that citizens can gradually meet their needs, the best is market pricing. Anyone who makes unnecessary products or provides useless services, are ruined and are looking for another occupation. Peace goes quietly and peacefully, the state gradually develops, and the population becomes richer. But here came the dashing times. As an example, let us assume that the country we are considering has entered a war. In this case, you need a lot of resources, you need production capacity and personnel. And if earlier everything was more or less normal, now instability is felt. Prices start to rise, there is a panic among the local population, and there is already a shaky situation inside the country nearby. To prevent this, the government introduces mandatory prices for all sellers. If someone violates this rule, then the corresponding consequences await him.
Impact on pricing
So we found out what are directive prices. From the material discussed earlier, it may appear that this mechanism is undesirable. But this is not entirely correct. So, practical experience has shown that the state has levers of influence on the dynamics of prices and market conjuncture. And, moreover, it must use its capabilities. True, this influence should be implemented not through a directive method, but with the use of a well thought-out system of measures of influence. And there must be a clear division of powers in this case: some of the actions are carried out by local authorities, others by the government. Ideally, we need a situation in which the market and the state are competing. So, if negative tendencies are outlined, the government manages to put up for sale stocks, so it affects as a brake on the development of a negative situation.
Negative Features
Despite the fact that there is no open inflation under directive pricing, in some cases it may occur. But it will be expressed in the shortage of goods and services offered. If at such a time to move to market pricing, then there will be a sharp rise in prices. That is, the use of the mechanism under consideration has a number of nuances and aspects that, when not taken into account, destabilizing processes occur and the proportions of production are violated. Theoretically negative aspects can be leveled in the future when finding the best distributing and controlling mechanisms than we have now.
Paradoxical features
Earlier it was mentioned that the state can establish not only a certain level of prices, but also its upper limit. But that's not all. In practice, there are cases when the state sets a lower limit as well. At first glance this may seem like an absurdity, but such a mechanism can be found in many countries. The best example is the size of the minimum wage. The state sets the minimum price that an employer must pay to its employee. And it is possible to meet this mechanism not only in countries that position themselves as socialist, but also in such a bulwark of capitalism as the US. The negative side of this feature is that the established minimum is often not enough even for all official expenses, therefore, the inhabitants of the country have to earn extra money on gray or black schemes. As compulsory spending, we consider food, public utilities and clothing. Often on the part of the broad masses of the population, the establishment of such a minimum is highly skeptical, it is considered a "mockery" on the part of the state. This, in turn, leads to a certain level of political instability.
Conclusion
Directive pricing is a mechanism that is difficult to give a definite assessment and say that it is definitely bad or good. In this case, there are pluses and minuses. Theoretically, with the development of mankind, the development of new methods for establishing prices, the establishment of effective interaction within society, the mechanism of directive pricing can make itself felt. After all, globalization processes are observed in the world, when here and there a company or corporation appears that claims a monopoly. And they, as we remember, can already be regulated by the state due to the tools available to it. But only within the limits established by law. Given the approach of such a situation, it should be noted that it is important that the head of the state were smart and honest people who would be ready to defend the interests of the people.