Recently, the statements of the Minister of Health became known, who asserted that "The market can't be the one to regulate", saying that "one could consider capping doctors' salaries." All of this is in the context of wanting to improve the functioning of the failed and poorly conceived S.N.I.S. (which should never have existed).
These statements constitute a monumental absurdity, which reveals ignorance of basic issues regarding how the price system works. First of all, it must be said that salary is one of the many prices in the economy. The free, non-intervened price system is what allows for the most efficient allocation of always scarce resources, for better utilization of them.
But what happens when politics intervenes? A distortion is caused in the price system, which now, as a result of political intervention, is artificially altered, no longer according to people's valuations, but to the preferences of the bureaucrat in office.
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The price control proposed by the minister by capping doctors' salaries, if implemented, is doomed to fail, inexorably and irreparably.
Prices in the market serve a cleansing function: they regulate the imbalances between supply and demand. The adjustment price is the one that ultimately manages to balance the situation. When the State sets maximum prices, as in this case, it prohibits selling above the fixed cap, generating distortions and encouraging black markets.
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The maximum price artificially set by politicians is usually below the market price. This generates shortages: demand persists, but production is discouraged. As a consequence, there are no incentives to produce and people end up facing shortages and overpricing in parallel markets.
