I hear that Argentina has imposed [update: economy-wide] price controls. I know next to nothing about Argentina, but I have spent some time thinking about the macroeconomics of price controls.
I can easily build a simple macroeconomic model showing that price controls are a good thing that can make everybody better off.
I cannot build a simple macroeconomic model showing that price controls are a bad thing. I don't think anyone else can either. Unless they assume the government price controllers are stupid. But that doesn't mean price controls are not a bad thing.
My guess is that price controls may be a good thing in the short run but will be a bad thing in the long run. I can explain why I think that, but I can't build a model to show that. That's the trouble with models.
If the real world really were as simple as my simple model, then price controls really would be a good thing, in both the short and long run. But the real world is much more complicated than my ability to model it, so I think that price controls will be a bad thing, at least eventually. But I can't model it, because it's too complicated for me to model.
I think that it is thoughts like this that drive Austrian economists to distraction. I sympathise. I think they are right. The, um, medium of modelling biases the message.
Here is a sketch of my simple model showing that price controls can be a good thing. It's exactly the same model that I illustrated in pictures in this old post. It's an absolutely bog-standard New Keynesian model with monopolistically competitive producers. The representative firm produces where Marginal Revenue equals Marginal Cost to maximise profits. But since the representative firm faces a downward-sloping imperfectly-elastic demand curve, its Price exceeds MR, and so P > MC.
Take that model, start in full equilibrium, freeze prices by law, then increase Aggregate Demand, and increase output, until the representative firm is producing where P = MC. The representative agent's welfare increases because an imperfectly competitive economy now behaves as if it were perfectly competitive. (The new equilibrium is at Y^ on LRAS(2) in my old post.)
I think that simple model which shows the benefits of price controls contains an important truth. But it is a very long way from the whole truth. What it leaves out is more important than what it contains.
What it leaves out is everything that, say, Hayek talked about in The Use of Knowledge in Society. We don't live in a simple world with identical people and identical (except for the flavour of ice cream each produces) firms where any one person (like the government price controller) can know everything about the economy. And things keep changing over time. So the government price controller won't know what prices to set, and the central bank won't know how much to increase AD, and everybody will think up all sorts of ingenious but socially costly ways to get around the price controls anyway.
Here's my best guess of what will happen. In the short run Argentina may see some benefits, for the same reason my simple model shows the benefits of price controls. Because in the short run the things that affect optimal relative prices and resource allocation usually don't change much. But in the long run those things change a lot, as small changes cumulate over time, as people discover new ways of doing things. That's where you need Hayek at work. But you can't get Hayek at work if the central planner freezes prices, unless you can convince him to unfreeze your price, which means you have to convey to him your local knowledge of time and place. (This is why centrally planned economies tend to have that frozen-in-time science fictiony look.) So in the long run price controls will make things worse.
I don't know how long the long run will take. And I can't model it. Its very nature makes it hard to model. Maybe impossible to model. If an armchair economist like me could fully model a market economy, we wouldn't need a market economy. Just make me central planner.