The Cuban dictator Miguel Díaz-Canel's recent admission that Cuba's generalized price caps failed to contain inflation, generated shortages, encouraged illegal markets, and reduced tax revenues is another confirmation of a much older economic lesson: price controls do not solve inflationary pressures, and they intensify the distortions they are meant to prevent.

The Cuban case is especially revealing because the criticism comes not from ideological opponents but from the regime that imposed the controls and later conceded their failure.

According to Díaz-Canel's own remarks, price controls in Cuba produced the opposite of their intended effect: instead of stabilizing prices, they encouraged product scarcity, illegal-market activity, higher effective prices, and falling tax revenues. The government's decision to eliminate price controls therefore amounts to an empirical acknowledgment that administrative decrees could not keep pace with economic reality.

This episode matters beyond Cuba because it captures the core mechanism of price control failure. When official prices are fixed below levels that would clear the market, legal suppliers reduce availability, quality deteriorate, and transactions migrate to informal channels where the real market price reappears, often with a premium for risk and scarcity. Thus, inflation is not abolished by decree but only transferred from the official statistics into queues, shortages, and the underground market.

The Austrian School of Economics has long argued that prices are not arbitrary numbers but indispensable signals coordinating dispersed knowledge across an economy. Ludwig von Mises claimed that intervening against market prices does not eliminate the underlying forces of supply and demand but rather creates secondary distortions that generate demands for additional intervention. Friedrich Von Hayek reminded us that market prices transmit information that no planner can centrally aggregate in real time, making administrative price fixing structurally destructive.

From this standpoint, price controls always fail because they attack symptoms of disequilibrium rather than the causes. Inflation is caused by monetary expansion, fiscal excess, and government intervention. Capping prices cannot restore equilibrium; it only disguises the visible expression of official price measures for a short time. Every nation that implemented price controls experienced repressed inflation, scarcity, and the transfer of exchange into underground markets.

Modern empirical research is almost unanimous. A broad review of studies on price controls and limits finds near-universal evidence of shortages and persistent inflation, along with lower quality, weaker innovation, and long-run welfare losses. Historical evidence from the United States also shows that wartime price controls and the Nixon-era stabilization program only brought rationing, shortages, and renewed price surges.