[The Editors' Verdict]The President Who Thinks He Can Control 'Market Prices' at Will

"In some areas, there have been rapid price increases to an extent that ordinary people find hard to accept and feel a sense of alienation, and such rapid price increases must be restored to their original state."

On the 14th, while watching President Moon Jae-in's New Year's press conference on TV, I doubted my ears the moment I heard this statement. We have learned that the government can intervene when the market economy does not function properly. However, the premise has always been that such intervention should be minimized because it can cause serious market distortions.

In a properly functioning market, prices naturally rise as the economy grows. The same applies to housing prices. The government can establish stabilization measures if prices rise excessively. However, President Moon said he would reverse this trend and restore prices to the levels of 2 to 3 years ago. This is a statement that someone with a basic understanding of economic principles would not make.

The main reason for wanting to lower housing prices is also far from market principles. It is to eliminate the sense of alienation. Rather than considering the ripple effects on the national economy, it can only be interpreted as a policy goal tailored to public sentiment. This is typical populism. Housing prices have indeed risen significantly in some areas. However, government intervention to artificially lower market prices cannot be a desirable solution. Government price controls in a market economy cause more side effects than positive effects. It is unclear whether President Moon seriously considered this when making his restoration remarks.

Whether or not one owns a home, real estate accounts for the largest portion of household assets in our country. Therefore, housing prices are a matter of national interest. Housing price fluctuations act as a major variable not only in the real estate market but broadly in finance and the overall macroeconomy. It is difficult to predict the economic ripple effects if housing prices are "restored" to the levels of 2 to 3 years ago. While some of the "ordinary people" President Moon refers to may feel vicarious satisfaction, the national economy is bound to fall into chaos. Japan's "Lost 20 Years" also originated from a sudden drop in housing prices.

After President Moon's remarks, the Blue House and government have been releasing unverified policy proposals as if the reins were loosened. The intensity is also stronger. Kang Ki-jung, Senior Secretary for Political Affairs at the Blue House, said, "The government should listen to calls for introducing a sales permit system for those who use real estate as a speculative tool." This mentioned the possibility of introducing a housing transaction permit system, which was previously a taboo. Sales permits could infringe on private property rights and are highly likely to be unconstitutional. The government's anti-market real estate policies are already embroiled in constitutional lawsuits. A representative example is the ban on mortgage loans for apartments exceeding 1.5 billion won under the December 16 real estate measures. There are claims that this infringes on constitutional rights such as the pursuit of happiness, equality, and property rights. In fact, due to the government's flood of real estate policies, even genuine buyers are now unable to move freely.

The president's remarks, which seem to disregard the market economy, are very dangerous. This is because they immediately act as "guidelines" for the Blue House aides and cabinet members who formulate economic policies. If the government signals that it will not properly adhere to market principles, corporate activities will inevitably shrink. This is because companies are exposed to the risk that the government can intervene in the market at any time. Although the president and government loudly call for investment activation and innovative growth, entrepreneurs remain cold due to these concerns.

No economist claims that the market economy is perfect. Nevertheless, the majority of countries worldwide have adopted it because, despite its flaws, there is no better system. State-led socialist experiments have ended in failure.

This content was produced with the assistance of AI translation services.