My intrepid Mercatus Center colleague, Veronique de Rugy, recently appeared on CNBC alongside University of Michigan economist Justin Wolfers. During the segment, Vero criticized Kamala Harris’s proposal to impose price controls on food. Wolfers disagreed, insisting that Harris is not proposing price controls. He noted that Harris never used the term “price controls.” Wolfers is correct about Harris’s vocabulary; he’s incorrect about Harris’s proposal. Vero is right: Harris is proposing government control of prices.
Media Matters for America, however, accused Vero of being “misleading.” Siding with Wolfers, Media Matters – which describes itself as “a web-based, not-for-profit, 501 (c)(3) progressive research and information center dedicated to comprehensively monitoring, analyzing, and correcting conservative misinformation in the U.S. media” – insisted, in bold print, “Kamala Harris did not propose price controls.” Media Matters seems certain that Vero’s “misleading” description of Harris’s proposal reflects her, Vero’s, right-wing ideology.
Well.
Anyone who knows Vero or who has read her work laughs at the notion that Vero is a right-wing ideologue. So I’ll say no more about this piece of uninformed slander.
Let’s look at a sample of how the media described Ms. Harris’s proposal when she first announced it. Here’s Jeff Stein writing on August 15th in the Washington Post:
In a statement released late Wednesday night, the Harris campaign said that if elected, she would push for the “first-ever federal ban” on food price hikes, with sweeping new powers for federal authorities….
The exact details of the campaign’s plan were not immediately clear, but Harris said she would aim to enact the ban within her first 100 days, in part by directing the Federal Trade Commission to impose “harsh penalties” on firms that break new limits on price gouging. The statement did not define price gouging or “excessive” profits.
Here’s Jim Tankersley on August 21st in the New York Times:
Vice President Kamala Harris threw her support behind a federal ban on price-gouging in the food and grocery industries last week. It was the first official economic policy proposal of her presidential campaign, and it was pitched as a direct response to the high price of putting food on the table in America today.
“To combat high grocery costs, VP Harris to call for first-ever federal ban on corporate price-gouging,” the Harris campaign proclaimed in the subject line of a news release last week, ahead of a speech laying out the first planks of her economic agenda.
It is still impossible to say, from publicly available details, what exactly the ban would do.
Justin Lahart on August 20th in the Wall Street Journal:
Rules against price-gouging can in effect become price controls. Standard economic theory shows that imposing a price ceiling on a product can discourage sellers, reducing the amount of a product that gets sold, leading to shortages. Rent-control policies are an example of a price ceiling that has become a staple of introductory economics textbooks, and as a group, most economists think rent control is a bad idea.
…..
DBx: Interpreting a call for a federal ban on so-called “price gouging” as a call for price controls makes perfect sense even if the proposal itself never uses any term such as “price control,” “price ceiling,” or “price cap.”
When the government announces that it will impose “harsh penalties” on firms that “price gouge,” the government is controlling prices. Sellers – inescapably in the dark about whether or not some price increase will be interpreted by the authorities as “price gouging” – will not raise nominal prices as often or by as much as they would in the absence of such a government threat. All the many inefficiencies, work-arounds, and subterfuges that competent economists – indeed, competent Econ 101 students – know will result from those government restrictions explicitly called “price controls” will occur under a scheme such as that proposed by Kamala Harris.
Tertiary differences might separate hard, fast, and explicitly named “price controls” from government threats to penalize “price gougers.” But the primary and foundational consequences of either of these chosen methods by which the government aims to keep prices below their market-clearing levels will be identical to each other.
Put most straightforwardly, when government threatens to penalize “price gougers” it aims to control prices. Period. End of story. Resorting to verbal tricks to distinguish Harris’s scheme to prevent “price gouging” from “price controls” is evidence either of profound economic ignorance or unmitigated political or ideological bias (and, in many cases, of both).
Vero is correct; Wolfers is incorrect. And also incorrect is Media Matters.
