Of Course Economists Hate This

Economists really hate Kamala Harris' proposal to limit price gouging.

Of course they do.  That's the world that they live in, where private business always act in their rational long term self interest, consumers behave rationally on the basis of complete information, and all of the children are above average.

This is, of course, a delusional fantasy, but, "Delusional Fantasy," pretty much describes the assumptions made by academics working in the dismal science, as Law professor, antitrust advocate and consumer advocate Zephyr Teachout explains:

Last week, the economics commentariat and much of the mainstream media erupted with contempt toward Kamala Harris’s proposed federal price-gouging law. Op-eds, social-media posts, and straight news reports mocked Harris for economically illiterate pandering and warned of Soviet-style “price controls” that would lead to shortages and runaway inflation.

The strange thing about these complaints is that what Harris actually proposed was neither radical nor new—and it certainly wasn’t price controls. In fact, almost every state already has a law restricting at least some forms of price gouging. Although Harris has not specified the exact design of her proposal, one hopes that it would follow the basic outline of state-level bans: forbidding unwarranted price hikes for necessary goods during emergencies.

………

For example, early in the coronavirus pandemic, some New York City residents complained that grocery stores were charging exorbitant prices for Lysol. But because those stores were merely passing along price increases from their distributor, they didn’t get in trouble. Instead, the state pursued a case against the wholesaler, which agreed last year to pay $100,000 in penalties and restitution. (During the pandemic, I took a sabbatical from teaching law to work for New York Attorney General Letitia James, with a focus on price gouging; I worked on the appeal of the Lysol case.)

Would that other pundits were so open in their disclosures:

Price-gouging bans are broadly popular—except among economists. The reason is that, in the perfect world of simple economic models, allowing sellers to charge whatever they want during periods of heightened demand is actually a good thing: It signals to the rest of the market that there’s money to be made on the product in question, which in turn leads to more supply. Accordingly, prohibiting gouging leads to less production of essential goods and services. Plus, letting prices rise helps ensure that the product will be sold to the people who value it the most.

Here, regular people seem to understand a few things that economists don’t. During an emergency, such as a natural disaster, short-term demand cannot be met by short-term supply, setting the stage for sellers to exploit their position by raising prices on goods already in their inventory. The idealized law of supply and demand predicts that new investors would rush in, but the real world doesn’t work like that. A short-term price spike won’t always trigger the long-term investments needed to increase supply, because everyone knows that the situation is, by definition, abnormal; they can’t count on a continued revenue boom. During a rare blizzard, sellers might jack up the prices of snowblowers. But investors aren’t going to set up a new snowblower-manufacturing hub based on a blizzard, because by the time they had any inventory to sell, the snow would long be melted. So after the disruption, all goes back to normal—except with a big wealth transfer from the public to the company that raised prices.

Let's talk about Uber, for example, whose app is alleged to jack up your fare when your phone battery is low.

Yeah, that will get you more cars on the street, jacking up the fare for one rider.

Economist like rich corrupt people because they fit in with their over-simplified views of the world, and because rich corrupt people make large donations to things like economics departsmnets and endow chairs.

Economists love corruption, because corruption benefits them.