Phillip Coles, writing in the Wall Street Journal, correctly calls the notion of ‘greedflation’ “baloney.” Two slices:
Since year-over-year inflation cooled to 2.9% in July from its 2022 peak of 9.1%, a search has begun for the culprit of the original inflation boost. Some politicians blame what they call “greedflation” or corporate “price gouging.” The truth is that government economic intervention was the problem, and free-market policies are the only remedy.
If greedy businesspeople were responsible for price increases, then slowing inflation would mean they are becoming less greedy. But while producers often think they can set prices, they rarely can. It isn’t because they aren’t greedy—they always try to change prices. It’s because they can charge only what the market will bear. It takes two opposing sides to make a deal, and consumers always look for a bargain. If the buyer won’t buy, the producer must lower the price or forgo the sale.
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As Milton Friedman taught us, “inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” Schemes like capping grocery prices have never controlled inflation. Vice President Kamala Harris should heed the lesson of President Richard Nixon’s failed wage and price controls in 1971. Such measures create shortages and fuel ever more inflation by disrupting the pricing signals that match supply with demand. Only free markets, along with good fiscal and monetary policies, will provide us with the products we want while taming inflation.
As economist Brian Albrecht explains in this great post,
it is fair to call this price control: Any policy that gives the government the power to decide what price increases are “fair” or “unfair” is effectively a price control system. It doesn’t matter if you call it “anti-gouging,” “fair pricing,” or “consumer protection” — the effect is the same. When bureaucrats, not markets, determine acceptable prices, we’re dealing with price controls.
That Harris was proposing some price-control schemes is how most economists and journalists (even those on the left) understood her proposal: the Washington Post editorial board, Jason Furman, Josh Barro, Catherine Rampell, and Ernie Tedeschi.
But the platform is also a peek into an economic worldview in which the government is the answer, almost no matter the question. While private businesses are always “gouging” or adding “junk fees,” or otherwise trying to rip somebody off, Washington’s wise men are capable of providing for the American people, if only they have the power to pass the laws and regulations.
How about calling for a reversal of the Trump-Biden tariffs that are partly to blame? Recall how President Trump’s steel and aluminum tariffs in 2018 prompted foreign governments to retaliate. The European Union slapped 31% tariffs on Harley motorcycles made in the U.S. China imposed 55% duties on U.S.-made motorcycles.
Because such tariffs would have rendered Harley less globally competitive, it shifted production intended for foreign customers to a new factory in Thailand. In 2019 it closed a factory in Kansas City and consolidated manufacturing in Wisconsin and York, Pa. Mr. Trump then kicked Harley by encouraging a boycott. Its U.S. sales fell 15% between 2017 and 2019.
Barry Brownstein is correct about those persons who seek power over others.
