My former GMU colleague Tom Hazlett corrects today’s revisionist misunderstanding of price controls. A slice:
Much is being made of the fact that prominent economists, following World War II, urged the continuation of wartime price controls in the U.S. to combat inflation. While President Harry Truman rejected this advice, abolishing such regulations in June 1946, some pundits now lament his decision. A recent essayin the Guardian, for example, argues that controls—once endorsed by such leading economic experts as Paul Samuelson and John Kenneth Galbraith—would have contained costs for consumers, as they did during wartime. This conjecture is then advanced to support the imposition of wage and price controls today.
That factual case involves a sleight of hand. Nominal price increases were limited in the U.S. during the Second World War, but widespread shortages and inefficiencies imposed large real costs on consumers and business omitted in the statistics. While the U.S. Office of Price Administration ostensibly limited charges to March 1942 levels, writes historian Meg Jacobs, “it was not uncommon for local stores to charge exorbitant under-the-counter prices, to sell shoddy merchandise at regular prices, or simply close down and reopen with new higher prices.” Evasion was not difficult: “candy makers reduced the weight of each bar.” Black markets flourished, while legitimate retailers adopted “tie-ins,” selling a desired product only with the additional purchase of something unwanted.
Oddly, today’s recommendation for World War II–style wage and price controls ignores the most serious test. That occurred in postwar Europe, where West Germany’s devastated economy—having lost two-thirds of industrial production and 20 percent of its housing units—was subject to strict price regulations by the U.S., U.K., and French occupation authorities.
Hunger and homelessness were everywhere; the average caloric intake in 1948 was just 1,300 per day.
Also doing sound economics on prices and inflation are John Stossel and David Henderson.
I’m always honored to be a guest on the Bob Zadek Show on radio – as I was a few weeks ago.
A closer look at the grocery industry actually reveals a highly competitive market. It’s true that the industry is dominated by large chains, with the top four firms — Walmart, Kroger, Albertson’s and Target — constituting about 35% of U.S. food sales in 2019, but it is equally true that the industry has thin profit margins (in the range of 1-3%). Indeed, one 2020 report noted that “despite rising incomes, the heightened competitive landscape has forced many operators to compete based on price.” So while grocery profits have risen slightly during the pandemic thanks to increased consumer demand, the industry still maintains some of the lowest margins of any economic sector. One can hardly call that anti-competitive.
Warren’s mistake is that she confuses having a greater number of small firms in an industry with competitiveness (and therefore lower prices). This ignores how easy it is for companies to enter or exit the market. In a market with relatively low barriers to entry, such as the grocery industry, a company’s actions are constrained by the threat of new competitors. The possibility of taking market share from incumbents incentivizes new companies to dip a toe in the water, limiting the ability of even large companies to take advantage of consumers.
Despite the industry’s relatively low profit margins, over the past few years there have been no shortage of newcomers, so much so that traditional brick-and-mortar chains increasingly seek to compete over the quality of the grocery shopping experience itself. Companies like Walmart, for example, now offer online ordering and same-day pick up to compete with non-traditional newcomers like Instacart and Blue Apron. The adoption of these new services exploded during the pandemic and is likely here to stay, meaning the industry will likely grow even more competitive in the future.
Eric Boehm wisely warns of the danger of America’s $30 trillion in national-government debt. A slice:
Yesterday, data released by the U.S. Treasury confirmed that the national debt reached a new milestone: $30 trillion.
The speed with which the federal government has piled up the third mountain of 10 trillion I-O-U notes is truly remarkable. Yes, the response to the COVID-19 pandemic drove government borrowing and spending to stratospheric heights—but even before COVID appeared on the horizon, the operative question about the national debt was when not if the country would hit $30 trillion. The drivers of the debt are an unbalanced entitlement system and a persistent gap between government spending and tax revenue—the result of more than two decades of poor decision making in Washington, where politicians from both parties have carelessly borrowed to pay for everything from foreign wars to $1,200 checks for most Americans (even those earning six-figures) during the pandemic.
Even if the growing debt doesn’t trigger a default or other crisis, it will have a material impact on Americans’ futures. Higher levels of debt are correlated with lower levels of future economic growth in no small part because the amount of money that must be siphoned out of the economy to pay the interest on the debt will keep getting larger. Every dollar used to service the debt is a dollar that can’t be used to invest in new technology, pay workers, or save for the next rainy day.
Charles Cooke is always insightful. CNN – not so much so.
Also from Charles Cooke is this criticism of ABC’s suspension of Whoopi Goldberg. A slice:
This isn’t just illiberal, it’s irrational. What Goldberg said was factually incorrect, yes. But so what? Figures on political TV shows say stupid and historically illiterate things every day — including about the Nazis — and nothing much happens to them as a result. What, exactly, was different about this one? Is warmed-over critical theory prohibited now?
And why does anyone care? ABC’s president explained that the suspension was a product of Goldberg’s “hurtful comments.” But who, specifically, was “hurt”? The View is a talk show, and a particularly stupid one to boot. Is there anyone in the world who takes it as gospel? I simply do not understand the mechanism by which viewers are supposed to be damaged in some way by watching an actress make mistakes on live TV. Where is this “hurt”? What does it look like? How long does it last? And how is it assuaged by barring Goldberg from the program for a fortnight? Goldberg isn’t the CEO of American Airlines, or the president of the Historical Society. She’s a participant on a chat show. No one in America is affected by her errors.
Also coming to Whoopi Goldberg’s defense is Arnold Kling. A slice:
First, the snark: By Joe Biden’s criteria, Whoopi Goldberg is more qualified than Laurence Tribe—to pick a name on the left—to fill the pending Supreme Court vacancy. End of snark.
Her comments on the Holocaust were erroneous and in bad taste. But as a free-speech absolutist, I defend her right to say things that are erroneous and in bad taste. And as a Jew, I am ashamed of the Jewish establishment leaders who pounced on her remarks and helped cause her employer to “suspend” her for two weeks.
The charge that was immediately made against Goldberg, and to which she later pleaded guilty, is that the remarks were “hurtful.” This is a red flag that the critics are crybullies. Whenever the criticism of speech is that it is “hurtful” to some group, I say that it is time to defend the speaker and criticize those who find it “hurtful.”
Nicholas Wade rightly criticizes Biden’s criteria for choosing nominees to the U.S. Supreme Court.
Recent research has documented a rise in income and wealth inequality to levels not observed since the Gilded Age. This paper argues that focusing on income inequality trends masks gains in relative welfare over time. For a given a distribution of income, welfare differences among different social classes converge if the relative price of manufactured goods declines over time. Using a simplified version of Matsuyama (2002)’s Flying Geese model this paper shows that, if initial productivity levels are low, the distribution of income may need to be very unequal to obtain welfare convergence.
George Will ponders Boris Johnson.
Nathan Goodman reviews Chris Coyne’s and Abby Hall’s book, Manufacturing Militarism.
