Very Interesting Article from the National Post!!

This is a very interesting article, about the press in China. I am totally surprised that a Chinese paper is allowed to publish such an article.

In the mean time, it is pretty scary if Edmonton and/or Calgary (or Alberta) is really thinking of implementing rent control. There is a saying by an economist (I forgot whom) said that rent control is the second-best way, other than nuclear bombs, to destroy a city. Let's hope this will not happen anywhere in Alberta.

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PUBLICATION: National Post
DATE: 2007.07.09
EDITION: National
SECTION: Editorials
PAGE: A12

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Beef noodles and Economics 101

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There is an interesting controversy in north China at the moment, one that involves a staple of the country's culinary heritage. Mention the city of Lanzhou to any mainlander and one of the first items he will imagine are the delicious stretched yellow noodles served locally with beef, clear broth, radishes and caraway. According to one travel guide, a Lanzhou resident is literally defined by the beef noodles he eats.

Lanzhou beef noodle bowls have traditionally been an affordable treat, but last spring the average local price of a large serving suddenly jumped from 27 cents to 31 cents -- no small change in a city far from China's metropolitan centre, where many people are still living on Third World incomes. The resulting outcry was so great that it reached the pages of The New York Times. A Communist party-led investigation found that a cartel of noodle-shop owners had agreed on a price increase and sent around an ominous circular urging colleagues to go along or face the consequences. But even the shop owners who opposed the cartel had to admit that their overhead, particularly in the costs of labour and beef, had risen.

Recently the city government of Lanzhou announced a special price ceiling on beef noodle bowls and declared that sellers who violated it would be punished to the full extent of municipal law. One might expect that this measure would be welcomed in a poor Communist society. But according to an op-ed in the Beijing Youth Daily (translated into English by the media and culture Web site Danwei.org), the local public has actually been quite skeptical. It turns out they do not regard the shop owners as inhuman predators, but as fellow citizens and enterprising artists who share the common burden of rising costs for health care and housing.

The market for beef noodles, observed the paper, is a highly competitive one with low barriers to entry, making it a poor target for regulation. "In a society whose prices are soaring upward, the majority of Lanzhou's beef noodle shops are operating on slim margins, so if they have no way to increase prices in response, then skimping on materials seems to be their only way out. If that is the case, then even if the price does not change, I'm afraid that so-called 'beef noodles' will no longer live up to their name." Another regional newspaper stated that "beef noodles are not a monopoly product, so the market will naturally adjust their price.... Under this argument, isn't the Lanzhou Price Administration Department a bit too broad in its management?"

Reading the array of press and popular response to the price controls, one can only stand astonished at the apparent political and economic sophistication of today's Chinese public. The editorialists and interviewees reacting to the beef-noodle regulations display an understanding that government intervention is not necessarily the right way to protect an essential piece of the country's cultural heritage; that entrepreneurs are the lifeblood of a nation; that price controls on a good are likely to discourage differentiation by quality, and encourage corner-cutting.

Are Canadians, on the whole, so well-informed and sensible? Here's a hint: hop on a plane tomorrow and fly to the most conservative province in Conservative-led Canada, and the first thing you will find (when you get to Alberta) is a Conservative government seriously debating price controls on rental property -- even though the immediate effects, known from decades of empirical study, would be to discourage both the upkeep of existing buildings and investment in new ones. It's like treating a tumour with a bullet. We can't last long competing with China unless we rediscover the competitive and libertarian instincts that we once had and that they seem to have acquired in what is, on a historic scale, a mere heartbeat.