Links - Prices Make Hulk Grumpy
To the rooftops!
The main reason I, like so many economists, are easily triggered by the proponents of anti-price gouging (and the concomitant desire for price controls to “correct” the “problem”) is that despite the intuitive appeal it is DEEPLY antiscientific thinking. It is emotions taking the place of rational thought.
Recently John Cochrane got characteristically grumpy about all the grumpiness progressives have been spewing regarding prices they don’t like.
So many gems in this piece.
Price gouging is wonderful for all the reasons that letting supply equals demand is wonderful. When there is a limited supply, then a sharply higher price directs that supply to those who really need it. It’s day 2 after the hurricane. Who really needs gas? An ambulance, police, or fire truck? A handicapped person, needing to get to a doctor across town? Or someone who could bike, take public transit, or walk with just a little effort to go see a friend?
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Paying higher prices is a reduction in your real income, and nobody likes that. But with less to go around, our collective real income is lower, no matter what the government does about it. The government can only transfer resources, not create them. And all the fixes to price gouging make the shortage worse, by discouraging people to cut back on demand or bring in new supplies.
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It is surely morally worthy to give what you have to your neighbors in time of need, especially the less fortunate. But we should not demand gifts. And appropriation of property by threat of force, turning off the best mechanism we know for alleviating scarcity, does not follow. Moral feelings are a terrible guide for laws.
Most politicians just supply what people demand. (A very few lead.) If the culture disapproves, they follow. Supply and demand, cause and effect, logic, evidence and experience be damned.
Never one to simply throw stones, Cochrane followed up with a partial list of constructive recommendations to actually advance the Harris campaign’s twin goals of increasing opportunity and lowering costs.
Among them:
Eliminate corporate taxes. Tax people when they spend corporate profits.
Prioritize economic immigration. If you want to come to the US, have a clean record, $10,000 in the bank, foreswear social services for a few years, come on in. Want to “lower costs” for health care, child care, elder care? Let them come. Legalize the 10 million who are here, working, paying taxes, staying out of trouble.
Eliminate tariffs, buy-American requirements, and other import protections.
Eliminate mandates for paid leave, health insurance, time off; eliminate hours, straight time vs. overtime laws, employee vs. contractor laws, minimum wages, comparable worth, and any other restriction on the right of workers and employers to contract. Employers will hire more people if they can more easily fire them. (This is also an “opportunity” move.)
National right to work. You’re free to join a union, but the union may not force all workers at a plant or company to join.
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Eliminate restrictive zoning and building codes. Build what you want on your property. (Subsidies for home buyers without expanded supply just drive prices up more. Government built housing just substitutes for cheaper privately built housing.) Remove bans on factory-built housing.
Remove rent controls and eviction controls. The ability to get rid of non-paying renters is key to getting landlords to rent and developers to invest in rental housing in the first place. See Argentina, where eliminating rent controls led to a quick supply of rental housing and lower rents, even before construction kicked in.
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Remove all “energy efficiency” mandates, starting with auto fuel economy standards and electric vehicle mandates. End ethanol in gas mandate. Bring back washing machines and dishwashers that wash. Let us buy whatever lightbulbs we want. Let the price of energy determine optimal efficiency.
End the “whole of government” war on fossil fuels, especially natural gas. We forbid pipelines and US exports, and then tell the Ukrainians not to bomb Russian fossil fuel facilities in order to keep supply up and prices down? If you must, impose a uniform carbon tax and no other energy regulation. If it’s true that renewables are now so cheap, you won’t have to.
Voucherize all health care and insurance subsidies, and let the free market rip to provide cheaper and better care.
Repeal the Jones Act. (Of course! Thanks Adolfo.) This is the act that requires all shipping between US ports be on US made ships and manned by US merchant marine. It has destroyed shipping and ship building in the US, and sent lots of goods by (much more polluting) rail and truck instead.
End all farm subsidies and price supports. (Thanks Jeff Carter.) How did I forget the oldest and most long-standing government effort to raise costs?
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Universal school vouchers. No more teachers’ unions. (No more government employee unions, as Franklin Roosevelt understood.)
Occupational license reform.
Stop subsidizing pointless college majors.
But were the progressives ever serious about actually looking for better prices and better opportunity? Are the conservatives? Is this just King Canute all over again?