By Steve Swedberg, Competitive Enterprise Institute
When Americans go to the grocery store, they expect to find food and drinks. Lately, many are encountering something else: sticker shock. According to a recent pollfrom the Consumer Action for a Strong Economy, 27 percent of Americans say groceries are their single largest affordability concern.
This aligns with a Pew Research survey finding that 66 percent of Americans are very concerned about the price of goods. Policymakers and advocates often propose ways to make groceries more affordable, including what economists call price controls.
Price controls are government-imposed limits on how much goods can cost, or rules that restrict how businesses set and adjust prices. Advocates argue that grocery price controls can protect consumers from skyrocketing prices, keep essential goods cheap, and promote fairness at the checkout.
Last month, Sens. Ben Ray Luján (D-NM) and Jeff Merkley (D-OR) proposed banning technologies and practices they say result in price discrimination. Sen. Elizabeth Warren (D-MA) has pushed for grocery price controls on more than one occasion. Former Vice President Kamala Harris advocated for a federal ban on price gouging on groceries when she ran for the presidency in 2024. New York City Mayor Zohran Mamdani would like to spend $70 million on government-run grocery stores.
Regardless of the form that price controls take, economic history offers a cautionary tale: controlling grocery prices often produces unintended outcomes. Current proposals risk repeating the same mistakes.
When market signals are distorted, shelves go empty
Politically, it can be tempting to promise to make groceries more affordable through policy. As the Cato Institute explains in its primer on price controls, fixing prices artificially distorts the incentives that guide supply and demand, discourages investment, and often produces shortages or surpluses rather than making goods more accessible.
Groceries are particularly susceptible to price controls. Retail grocery profit margins are razor thin, averaging just 1.3 percent, according to New York University. When prices are artificially restricted, stores have a minimal cushion to absorb losses. Groceries are also highly perishable. This dynamic makes inventory riskier and supply more sensitive to price changes, making it that much more difficult to control prices.
Food prices are highly sensitive to factors like weather, global commodity swings, transportation, and disease outbreaks. The supply chain is also complex: a single item can involve multiple farmers, processors, packagers, shippers, wholesalers, and retailers. In a market where timing is everything and margins are wafer-thin, even small distortions can have outsized consequences.
Lessons from US grocery price controls
Price controls for groceries are often presented by politicians and policy analysts as a fresh solution to rising costs, but they are anything but new in US economic policy.
New Deal-era agricultural price controls lingered far longer than many Americans realize. The prime example of this is the federal raisin marketing order created under the Agricultural Marketing Agreement Act of 1937, which required growers in certain years to divert a portion of their crop into a government-controlled reserve to limit supply and support prices.
Economic analysis of the federal raisin marketing order found that it supported prices by withholding part of the crop from sale in large harvest years, but also restricted supply. The program also failed to reliably increase grower income because farmers could sell only part of their harvest and often received little or no payment for the reserve share. The system lasted for decades until raisin farmers challenged it in Horne v. Department of Agriculture, at which point the Supreme Court ruling ended the program in 2015.
Grocery price controls did not stop with the New Deal era, though. In 1942, the government implemented the Emergency Price Control Act. This WWII-era law was a series of price controls across multiple industries, including food. While the government stabilized prices, it exacerbated shortages by 7.1 percent.
A 1943 Bureau of Labor Statistics appraisal found that the quality of consumer goods declined. This NPR report describes how businesses resorted to other tactics to compensate for the price controls, including filling sausages and hot dogs with potatoes or cracker meal, steaks with extra bone, mixing roasted cereal with coffee grounds, and selling grass as tea.
The US has implemented grocery price controls outside of wartime as well. In the 1970s, the Nixon administration implemented price controls on a swathe of goods, which encompassed food. These price controls were not as successful at stabilizing food prices due to external shocks (e.g., crop yields, global food prices) and inflationary pressures. Nevertheless, government reporting shows that the price controls on food limited livestock expansion, discouraged food production, and constrained food supply chains.
California implemented a system of minimum milk prices in the 1930s and persisted for decades. By prohibiting retailers from selling below state-mandated minimums, the policy kept milk prices above competitive levels and limited discounting, meaning families paid more even when market conditions would have allowed prices to fall.
A contemporaneous law review observed that supermarkets were required to adhere to fixed minimum price schedules rather than respond freely to competitive pressures.It is therefore unsurprising that the US Department of Agriculture found that the price floor enriched in-state milk producers at the expense of Californian consumers.
Different countries, same outcome
Price controls on food are not uniquely US experiments. Governments around the world have repeatedly imposed price ceilings or floors on staple goods to tame inflation or protect consumers, often with similarly distortionary results. In Zimbabwe, for example, government‑mandated price controls on basic goods during the early 2000s were associated with diminished production, supply shortages, and the growth of black markets as sellers struggled to operate at the mandated prices.
Similarly, in Venezuela, price controls induced disinvestment in the food sector and caused major food shortages. These extreme cases illustrate the broader principle that statutory price limits tend to create unintended consequences, a pattern that also emerges in more typical, less extreme settings.
For instance, from 2007 to 2015, Argentina implemented targeted price controls on groceries in a program called Precios Cuidados (literally translated as “careful prices”). Evidence from the Argentinean experiment shows that grocers introduced higher-quality versions or larger-size variants that were not price-controlled. In the long run, the price controls did not help with inflation of affected goods, and they did not make other groceries cheaper.
Hungary offers a more recent illustration. Earlier this decade, it imposed price caps on certain foodstuffs, including chicken breast fillets. Researchers found that the caps lowered prices but distorted market incentives and constrained the supply of chicken breast fillets.
This price ceiling contributed to scarcity and limited the effectiveness of the policy in ensuring food availability. A media outlet from Hungary similarly documented retailers imposing quantity limits and retailers withdrawing price-capped products from wholesale channels because suppliers were unwilling or unable to offer sufficient stock at the capped prices.
The EU also has a long history of price controls. In 1962, the European Commission implemented the Common Agricultural Policy (CAP). CAP was created to deal with the low agricultural productivity following World War II. One of the methods of CAP included intervention prices, which are a type of price floor where the government agrees to buy a commodity if market prices fall below it.
With prices often above world market prices, the EU ended up with massive surpluses, famously dubbed “butter mountains” and “milk lakes,” that were stored atthe taxpayer’s expense. The Economic History Association points out that the intervention prices were “substantially above the prices prevailing on world markets [and] raised the cost of food for European consumers.”
The Organisation for Economic Co-operation and Development noted that “market-distorting price transfers declined substantially” since the 1992 reforms, a tacit acknowledgment that the price floors reduced export competitiveness.
The temptation of simple solutions
Whether it is prescription drugs, a credit card interest rate cap, rare earth metals, or groceries, price controls distort incentives and create unintended consequences. For groceries specifically, price ceilings typically translate into empty shelves and scarcity, whereas price floors can cause higher costs and surpluses that benefit producers rather than shoppers.
The evidence delivers a clear message: grocery price controls have been tried repeatedly, and they fail to result in greater affordability or availability. For shoppers, this is not an abstraction. Price controls affect their ability to feed themselves and their loved ones. Government-imposed price controls may appear to offer a simple solution, but the burden ultimately falls on everyday people.
Steve Swedberg is a Policy Analyst with the Center for Economic Freedom, focusing on financial, monetary, and transportation policy.
