So now Kamala Harris says she wants price controls on groceries to stop “price gouging,” even though grocery stores operate on razor-thin margins. Scott and Steve have already noted how profoundly stupid this is. I just want to add a few words.
First, price controls (notably, price controls on groceries) have a long history, extending back 2,000 years. They always fail, without exception. If price controls worked, every country would have started using them centuries ago. As Milton Friedman demonstrated, and as virtually everyone now acknowledges, inflation is always and everywhere a monetary phenomenon. It is caused by governments; in this case, the Biden/Harris administration. Groceries have increased in price, like everything else, due to Bidenflation.
Second, when it comes to prices, there is really only one instance of “gouging.” Companies compete for our business by offering the best products they can, at the best price (for them) that consumers will pay. Competition keeps prices down and quality up; no company can just “gouge.” If it charges too much, consumers will buy somewhere else, or something else.
The exception, of course, is when a company has a monopoly and there is no effective competition. This is why we have Section 2 of the Sherman Act. But there is one monopoly that never goes away, and isn’t subject to antitrust liability: government. At the state level, there is some degree of competition. Thus, if a state charges prices–taxes–that are too high, or offers products–government services–that are of low quality, some residents (but not all) can leave for better-run states. That is exactly what is happening now, as people flee blue states for red states.
But the federal government has no competition. It can engage in price gouging and provide lousy services, and, unless you are willing to move to Costa Rica or Switzerland, there is little you can do about it.
And the federal government’s price gouging includes more than taxes that are way too high. Because the federal government engages in deficit spending for political reasons–what a deal, to give some Americans money without having to tax other Americans to pay for it!–it borrows trillions of dollars, which causes inflation. So it is the federal government’s price gouging, not that of anyone in the food supply chain, that has driven recent increases in grocery prices.
Kamala Harris is one of the premier price gougers of our time.
Third, there is no workable way to implement a price control system. That was true two thousand years ago when the Romans tried it in the context of a vastly simpler economy. It is still more obvious today.
In 1971, President Nixon–no conservative, by modern standards–issued an executive order, pursuant to the Economic Stabilization Act of 1970, imposing a freeze on wages and prices across the American economy. A huge majority of Americans approved. (Bad economics are popular, as often as not.) Nixon’s freeze lasted until 1973, by which time it was universally seen as a fiasco, and it expired.
I had a personal brush with America’s experiment with a command economy. It arose from this fact: no one thinks that you can actually freeze prices. That would be sheer disaster. You have to allow for exceptions, as Nixon’s order did. So of course, almost every company in the U.S. stood in line for an exception, most with solid grounds under the terms of the order.
I was a summer clerk at the principal law firm in the Upper Midwest in 1973. One day, a partner in the firm came to me and said he had an unusual assignment. The firm was preparing a filing for the Price Commission on behalf of a client, seeking relief from the price freeze. (You can only imagine how many tens of thousands of such petitions were filed.) In those days, there was no internet, and not even fax machines. The filing on behalf of our client wouldn’t be finished in time for it to be mailed to the Price Commission before the relevant deadline kicked in.
That was where I came in. My task was to fly to Washington, stay overnight, and in the morning, deliver an envelope containing our petition and accompanying brief to the Price Commission. Carrying our documents in a briefcase, and feeling somewhat like a secret agent, I took a taxi to the address I had for the Commission and carried out the filing the old-fashioned way, in person. It was a great relief to part with the documents and see them time-stamped by a Price Commission clerk.
All of this was idiotic, almost beyond belief. It didn’t take long for people in the early 1970s to realize that price controls are, at best, an exercise in futility. And yet, here we are, 50 years later, with ignoramus Kamala Harris and the Democratic Party demagoguing them once again.
