Epistemic status: Trust me bro

A common lament, among foodies in Nairobi, is that every new restaurant that opens in the city goes through the same cycle. The restaurant starts off serving great food and drinks, accompanied with great customer service, it is posted a lot on Instagram, on TikTok, and everyone talks about it on twitter. This makes it even more popular and quickly gets crowded. You now need to reserve a table; sometimes weeks in advance. The quality of food slowly declines, for which, the foodies apportion blame on the owner of the restaurant; who stopped inspecting each plate leaving the kitchen. A few customers complain about the service on social media. The restaurant reviews on google maps drop from a 4.5 to 3.9. The foodies inevitably move to the next new popular restaurant restarting the cycle all over again.

Likewise, the chefs have a bone to pick with these sophisticated restaurant patrons. The Business Daily Africa¹, the major business newspaper in Kenya, ran an article recently on Kenyans' taste for beef. The writer highlighted their love for well-done steak. The grill chefs, for whom medium done is too done, were commiserating with the interviewer, on how they have been reluctantly preparing well done sirloin for these so-called connoisseurs of gourmet food.

New entrepreneurs getting into this business might wonder what could be going on here. On one hand customers are complaining about not getting what they need and on the other hand restaurateurs are wondering why no one wants to buy superior quality food from them. The customer and business owner experience quality differently. To the chefs, quality is beef that is made in a certain way. To the sophisticated customers, good restaurants should not be crowded and busy. It is not that the owner is uncaring, they are responding to their customers' needs. Foodies are a very niche type of customer. While in the beginning the chef could easily indulge their tastes, most customers do not care that much. This is what the business owner sees and quickly adjusts. The chefs likewise also change and are no longer concerned about quality but about volume. For at low volume the chefs using existing recipes can always make sure that each plate is great, but at higher volume what becomes important is moving fast. This leads to lower quality dishes - according to some - leaving the kitchen. The earlier high rating for the restaurant simply signalled that the food was okay for most people, and therefore more customers went to the restaurant, even though, in comparison, the rating is now low.

There are restaurants that serve these high-quality dishes, where the prices on the menus are equivalent to one month's income for many people. While the cost of food ingredients might be the same for both a high-end restaurant and a fast-food outlet, onions are still just onions. Each restaurant charges a different price for the same dish. Restaurants have therefore competed on variety, ambiance, and location. Customers are not just paying for the food they are paying for other services. We know that prices transmit knowledge on the relative cost and scarcity of goods. Even in cases where the goods are standard, other factors also come into play. On the off chance that one restaurant can get away with charging higher prices, this is usually a short-lived experience. As highlighted by Murray Rothbard, in Man, Economy and State², in a free market where anyone is free to start a business, other firms will be attracted to the business and simply offer the goods or services at a lower price which inevitably drives down the prices. The price of onions, for example, has remained constant even when adjusted for inflation³. There is also never any shortage even during economic crises. Why? When there is no government-imposed monopoly, the prices of goods and services are usually remarkably close to the cost of production.

The type, quality and price of food is therefore a result of the forces of demand and supply. The chefs supply what is needed, sometimes begrudgingly and the foodies pay higher prices willingly for these tiny high-end restaurants, located in hard-to-reach places and where tables are booked months in advance⁴. The other thing to bear in mind is that customers have different calorie demands at various times in their lives. When young, high-energy food is needed for growth but for the old, sustenance for the day is all that is required. Likewise, a simple sandwich is preferred for lunch on a busy workday even for higher income earners. The price of a sandwich might therefore be the same at all income levels. The prices of a good beef or chicken sandwich could vary slightly, depending on where it is sourced and who is buying, however this is still determined by the market forces.

Let us say that for some reason there is a pandemic and the chicken and cows' stock in the country is decimated, as it has occasionally happened in some countries most recently⁵ in the USA when the government asked farmers to cull chicken due to a flu outbreak. The low supply leads to higher prices for ingredients, such as eggs. This higher cost leads to higher prices for sandwiches. Those who cannot afford egg sandwiches will simply switch to new sources of carbohydrates and protein. This is ordinarily what would happen in an economy that is relatively free. In the less free countries and economies, price controls would prevent retailers from adjusting the prices of goods they sell. The key question here is whether the consumers would be better off if sandwiches were the same prices now, as they were before the bird flu pandemic. Are price controls beneficial?

Before we can answer this question we need to ask, where do these eggs and other ingredients come from? Macdonald, our farmer, considers a field and buys it. He knows that it is a big financial risk starting a farming business having been the child of a farmer himself. He, however, knows it can also be very lucrative. Before he plants or buys any calves or chicks or even his tractor, he first heads to the local library and reads all he can about farming. Having this knowledge and his experience, he produces a business plan. A few months later he finally harvests crops that he can sell at the market. He counts his cost and sees he can sell his wheat and beef at a certain amount for profit. When he gets to the market, he discovers that his prices are higher than the government mandated prices. He must sell at these prices or go to jail. This is the experience in a non-free, price controlled, market for producers of any type of goods or services.

But suppose you really wanted to control the prices of consumer goods out of a concern for the poor and oppressed, on “this side of eden”⁶. The people of the Kingdom you live in, complain to the King about rogue sellers supplying poisonous low-quality beef or they cry to him that no one knows how to make steak. You, because of good fortune, find yourself with absolute power granted by the ruling monarch to plan the economy as you please and solve this important problem. How would you go about it? What would be your goals? How would you go about achieving economic prosperity for all the people under your domain so that they get the best goods and services at the best price. One of your goals would be to ensure that the prices of these goods are as close as possible to the cost of making them. Secondly, you would want to make sure that the supply quickly and easily adjusts to peak demand; there will always be enough ice-cream in hot weather. Thirdly, you want the best quality and widest variety of goods and services supplied. Lastly, as the population of your country grows and as their desires change so does the supply to keep up.

For the first and last goal, the best approach would be by making it easier for anyone to start a sandwich shop or any other type of business. If there is only one store that sells the goods, their margins are big and correspondingly the prices high. To reduce the cost of these and others, the best way would be to let other people also sell, spread the profit so to say. Remember you have been asked by the king to make sure everyone benefits. With more people supplying, few would charge exorbitant prices. This also ensures that as soon as supply decreases and prices go up, more people enter the industry, and this increases the supply solving the supply issues.

For the second goal of making sure there is always enough, and nothing is wasted, you would let the sellers increase prices when the supply drops compared to demand during a short-term change in needs such as during hot weather. This way using prices only those that really want ice cream can buy or buy less, leaving more for others. Another advantage of this is that you do not need elaborate bureaucracies to manage this. The important thing is that the supermarket shelves will always have ice cream so that the king is never blamed for a shortage: keeping your head attached to your shoulder is also important. Yes, people might die due to an unscrupulous butcher selling unsafe donkey meat as beef steak but the number of people who might die because of a shortage of food are much higher⁴. This also covers the third goal. With the ability to charge different prices, you allow the ice cream makers to charge different prices for different qualities and varieties. Again, this guarantees that everyone gets ice cream and the type they like even if it is not the best quality.

We see here that it is for the benefit of the tyrant not to control the prices nor give anyone monopoly over any goods and services. Price controls, whether they be price floors or price ceilings, usually lead to the following outcomes. One, they rob the farmer of his labour. Second, they distort the market by creating demand where there should not be, thereby depriving access for those that are willing and able to pay the cost of the product or service. Greed and gluttony also have a cost; prices allow for moderation and control of what is needed. People want different things at different times in their lives and of varying quality. Children's needs compared to adults' needs for food, for example, are different. Without price discrimination, this distinction in the type of customer and their wants is not accounted for. The result is that with more controls, the quality of what we eat either quickly deteriorates or we end up with empty supermarket shelves; you can have a free market where entrepreneurs decide what to produce and at what price to sell or you can impose price controls and get neither quantity nor variety. You cannot have both. Third, by using price controls, farmers have no incentive for innovation, and this reduces the supply of needed goods and overall variety. The hate of money as a measure or when false weights - price controls - are used in determining how much something should be sold for and at what quantity, leads to servitude and theft. The very things those who despise free enterprise advocate against.

Notes:

1. "Kenyans' Low Appetite for Rare and Medium-Rare Steaks Baffles Chefs," Business Daily Africa, April 10, 2024, https://www.businessdailyafrica.com/bd/lifestyle/food-drinks/kenyans-low-appetite-for-rare-and-medium-rare-steaks-baffles-chefs--4585858.
2. Rothbard, Murray. Man, Economy and State: A Treatise on Economic Principles. Princeton, NJ: D. Van Nostrand, 1962. (section on "Monopoly and Competition.")
3. Price of onions as listed in the KNBS inflation report for December 2020 was KES 100.23 for 1kg. Adjusted for inflation using this calculator (yuthufu.com) price is KES 132.78. The price of onions on 12th July 2025 on the https://naivas.online supermarket is KES 129. https://www.knbs.or.ke/wp-content/uploads/2023/09/Kenya-Consumer-Price-Indices-and-Inflation-Rates-December-2020.pdf
4. Paumgarten, Nick. "Damon Baehrel, the Most Exclusive Restaurant in America." The New Yorker, 22 Aug. 2016, www.newyorker.com/magazine/2016/08/29/damon-baehrel-the-most-exclusive-restaurant-in-america.
5. "Egg Prices Soar as Bird Flu Spreads Across US," ABC News, March 12, 2025, https://abcnews.go.com/Health/egg-prices-soar-bird-flu-spreads-us/story?id=118449889.
6. Block, Walter. Defending the Undefendable. New York: Fleet Press Corp., 1976. (Chapter 13.).