The cackling “progressive” class ‘round these parts hasn’t taken long to form a bucket brigade and carry the water for a certain presidential candidate’s proposal to invoke “price controls” to battle the bad actors that are supposedly “gouging” consumers.
More specifically, the proposal involves a federal ban on “corporate price-gouging in the food and grocery industries.”
Ah, the sheer folly of the ignorami.
As Don Boudreaux, an economics professor at George Mason University, reminds, “the historical record of price control is one of unremitting calamities.”
“Many of us still remember the nationwide shortages of gasoline in the 1970s when government capped fuel prices. The long lines of cars with anxiety-stricken drivers waiting to buy gas, and roadsides dotted with stranded cars with empty fuel tanks, ended only when Ronald Reagan lifted these controls early in his administration”.
And he points to the experience of price controls during World War II as being even worse, quoting economic historian Robert Higgs:
“Sellers and buyers used a variety of subterfuges to make transactions in violation of the government’s price controls. Sellers might reduce the product’s quality, as many did at the time; require the buyer to wait longer for an order to be filled; require the buyer to purchase unwanted goods in order to purchase wanted ones; require the buyer to pay for bogus goods, as when tenants were required to pay the landlord a hefty sum as ‘key money,’ ostensibly to compensate him for keeping a spare key in case the tenant lost his key; require the buyer to forgo services normally associated with the goods, such as routine maintenance of rented apartments; or require gifts or other ostensible gratuities not ordinarily given to a seller.
“Sellers might also simply disregard the posted prices and refuse to sell to anyone except at higher (unlisted and unreported) prices. The methods of evasion were legion.”
More specifically, Allison Schrager, writing in the Manhattan Institute’s City Journal, characterizes the “anti-gouging” proposal as “the wrong solution to a nonexistent problem.”
To wit, the senior fellow reminds, “Food prices have steadily fallen over time as a share of income. The exception was the pandemic, where the cost of food eaten at home rose 20 percent. This was caused not by grocers’ price gouging but by shortages and elevated demand from excessive fiscal policy. The natural market response to less supply and more demand is to raise prices. Doing so eliminates shortages and keeps markets functioning.”
Furthermore, Schrager reminds that “inflation on food at home now stands near zero.”
“People are frustrated, though, because prices are significantly higher than they used to be; short of mandating wage cuts for everyone involved in the food chain, there is no way to bring prices back to 2019 levels.”
And here’s a dirty little secret lurking in the “anti-gouging” measure: This certain presidential candidate’s plan “also entails raising the federal minimum wage to some unknown level, which will increase labor costs for grocery stores and undermine any effort to lower prices,” Schrager says.
Schrager’s bottom line, and that of most credible economists, is that “price controls don’t work, succeeding only in creating shortages and making inflation worse. Price controls reduce merchants’ incentive to secure more goods that they must sell at a loss.”
But these fundamental precepts of sound economics are lost, totally, on those pimping for such policies as “anti-gouging” laws, those hell-bent on snookering the public for political gain by selling their own pig in a poke.
And it is incumbent upon the public, including the cheerleaders for such buncombe in Pittsburgh and elsewhere, to educate themselves, stop the snookering — and stop being snookered.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
