Milton Friedman noted that when people spend other's people's money on other people, inefficiency is the expected result. To wit:
Mexico's government owns Pemex, which is the major producer of crude oil in Mexico.
To mollify the masses, the Mexican government subsidizes gas retailers to lower prices at the pump.
Except that Pemex (and Mexico as a whole) doesn't have enough refinery capacity to make enough gasoline for the whole country.
So ... get this ... they sell crude oil to the U.S. at the going rate, buys back gasoline at the going rate (about 1/3 higher), and then knocks over 40% off of that price to sell to consumers.
Taxpayers foot the bill.
Here's the article Dave links to. It describes textbook examples of why and what happens when price ceilings are put in place.
When politicians make decisions that result in things like this, they aren't being stupid. They are merely responding to the incentives they face, namely staying in power while using other people's money to do so.
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