Source: Brownstone.org
There is a lack of public comment and debate about Kamala Harris’s call for price controls on groceries and rents, the most stunning and frightening policy proposal made in my lifetime.
Immediately, of course, people will reply that she is not for price controls as such. It is only a limit on “gouging” (which she variously calls “gauging”) on grocery prices. As for rents, it’s only for larger-scale corporations with many units.
This is nonsense. If there really are national price-gouging police running around, every single seller of groceries, from small convenience stores to farmers’ markets to chain stores, will be vulnerable. No one wants the investigation so they will comply with de facto controls. No one knows for sure what gouging is.
Don Boudreaux is correct: “A government that threatens to punish merchants for selling at nominal prices higher than deemed appropriate by government clearly intends to control prices. It’s no surprise, therefore, that economists routinely analyze prohibitions against so-called ‘price gouging’ using exactly the same tools they use to analyze other forms of price controls.”
As for rental units, the only result will be fewer amenities, new charges, new fees for what used to be free, less service, and a dramatically reduced incentive to build new units. That will only lead to a pretext for more subsidies, more public housing, and more government provision generally. We have experience with that and it is not good.
The next step is nationalizing housing and rationing of groceries because there will be ever fewer available.
The more the betting odds favor Kamala, the stronger the incentive to raise prices as high as possible now in anticipation of price controls come next year. That will provide even more seeming evidence for the need for more controls and a genuine crackdown.
Price controls lead to shortages of anything they touch, especially in inflationary times. With the Federal Reserve seemingly on the verge of cutting rates for no good reason – rates are very low in real terms by any historical standard – we might see wave two of inflation later next year.
Next time, however, merchants will not be in a position to respond rationally. Instead, they will confront federal price investigators and prosecutors.
Kamala is wrong that this will be the “first-ever” ban on price gouging. We had that in World War II, along with rationing tickets on meat, animal fats, foil, sugar, flour, foil, coffee, and more. It was a time of extreme austerity, and people put up with it because they believed it was saving resources for the war effort. It was enforced the same as we saw with covid lockdowns: a huge network enlisting state and local institutions, media, and private zealots ready to rat out the rebels.
Franklin Roosevelt issued Executive Order 8875 on August 28, 1941. It claimed broad powers to manage all production and consumption in the US. On January 30, 1942, the Emergency Price Control Act granted the Office of Price Administration (OPA) the authority to set price limits and ration food and other commodities. Products were added as shortages intensified.
And yes, all of this was heavily enforced….