Democratic presidential nominee Kamala Harris plans to unveil an economic plan Friday that features a crackdown on “price gouging.” It would do nothing. For proof, look to Colorado.
The New York Times reported Wednesday that Harris will promise to end “price gouging” in “an aggressive rhetorical attempt to shift the blame for high inflation onto corporate America. Polls show that argument resonates strongly with voters …”
It polls well by appealing to the emotional response to high prices: blame the seller, who can set prices arbitrarily based on greed.
Anyone who puts this through scrutiny knows the emotion does not comport with truth. If sellers can set any price, they are remarkably kind. It is hard to fathom why they would sell a dozen eggs for $7, rather than $100 or more. In a world of price gouging, the limitless sky sets the limit.
Anyone can feed a chicken and produce eggs. Yet, the price of an egg — or any other consumer product — fluctuates based on countless organic market forces that combine to establish supply-demand equilibriums. Egg prices hit an all-time high in 2023 substantially because the bird flu epidemic reduced supply.
Before that, egg sellers experienced upward pricing pressure in 2022 when a law in California — the world’s fifth-largest economy — required eggs to come from cage-free hens. That’s an expense producers afforded by raising prices.
Before that, winter storms in 2021 caused some of the country’s largest egg producers to euthanize hundreds of thousands of chickens and destroy hundreds of thousands of eggs.
Fuel prices — which directly affect prices of eggs and all other goods, services and commodities — increased after President Joe Biden, with the full support of Harris, halted construction of the Keystone XL pipeline and forbade new energy leases on federal onshore lands and offshore waters.
One can examine anything bought and sold to learn that sellers have minimal discretion in pricing. Only monopolies facilitate sustainable price gouging, and our state and federal governments punish monopolies. Without a monopoly, sellers attempting to price gouge open a niche for all competitors able and willing to sell for less.
Nearly all serious economists attest that price gouging plays a near-irrelevant role in the Consumer Price Index. Anyone who questions this should look to Colorado.
Colorado’s Democratic Gov. Jared Polis signed a 2020 law against price gouging within 180 days following a disaster declared by the governor or president. This year, the governor signed another price-gouging bill to control post-disaster rent prices.
We asked Attorney Gen. Phil Weiser if price gouging legislation has helped through wildfires and floods.
“There has not been a need for the attorney general yet to take action with the price-gouging law,” said AG spokesman Lawrence Pacheco.
No need for enforcement, despite multiple emergency declarations by the governor and president. That’s because gouging is rare-to-nonexistent in competitive markets.
The U.S. Small Business Administration reports that “small businesses,” which average $53,000 in annual revenue, make up 99% of American businesses. Among those that succeed, profit margins average between 7% and 10%. Among supermarket chains, profit margins average 1%-3%.
It seems gougers would want more.
“This is not sensible policy, and I think the biggest hope is that it ends up being a lot of rhetoric and no reality,” Harvard economist Jason Furman, a former adviser to President Barack Obama, told The New York Times in response to the Harris price-gouging offensive.
To get shortages and more inflation, impose government price controls. Human history proves this true. For lower prices and more supply, reduce regulations and encourage production of food, fuel, housing and everything else humanity needs.
The Gazette Editorial Board