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Congress: Miracle Worker

Here’s a letter to the Programming Director of CNBC:

Sir or Madam:

Whatever is Amazon’s reason for calling on Congress to enact a nationwide ban on so-called “price gouging,” any such ban is bonkers (“Top Amazon exec calls for federal price gouging law amid coronavirus scams,” May 13). When supplies fall relative to demands – as they do for many goods and services during crises – available units become more valuable as people become more desperate to obtain these supplies. The resulting higher prices reflect these higher values which themselves are the result of fewer supplies relative to demand.

Legislatively preventing prices from reflecting these higher values does not change the underlying reality. Indeed, this reality is made worse because the inability to charge higher prices reduces producers’ incentives to exert the necessary extra effort to increase supplies.

If Congress really could increase the affordability of goods simply by banning price hikes, why not ask Congress to work an even better miracle? Why not call on Congress to do nothing less than ban the coronavirus? “Be it enacted that the coronavirus is henceforth not permitted in the U.S.” Poof! With a miracle worker apparently at our service, why waste its time performing the equivalent of a dog-and-pony show; let’s demand that it eliminate the root cause of today’s problem. Virus, be gone! You are hereby outlawed!

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030