While Tillis panders on “price-gouging,” Locke’s Sanders makes A LOT of sense
Everybody who has taken an economics class knows that when the supply of something is low, and demand is up, the price generally goes UP. But statists (and many a pandering politician) want to pile on the red tape and make the situation even worse.
Thom Tillis, who got elected to the US Senate in 2014 without cracking the 50 percent mark, is back on the ballot saying just about anything to save himself from a disgusted base and bloodthirsty liberals. His panders have included everything from gay rights to “price gouging.” Tillis and his campaign are touting a bill to punish alleged gougers with fines up to as much as TEN MILLION DOLLARS.
It’s too bad that Tillis and more like him aren’t listening to Jon Sanders with the John Locke Foundation:
[…] Repeal or suspend the anti-“gouging” law
Why: to prevent shortages, discourage hoarding of key supplies, and return supplies quicker
Part of Gov. Roy Cooper’s March 10 executive order included activating the state law against “price gouging.” Economists have repeatedly shown that anti-“gouging” laws are doubly bad during an emergency. They lead to shortages faster and more often, and they make restocking harder.
The reason is simple: they are government price controls that prevent prices from reflecting sudden changes in supply and demand. Price controls are what kept shelves in Venezuela and former Communist bloc nations habitually empty of necessities.
During an emergency, people naturally want to stock up on necessities. Short-term demand for necessities goes up, especially when people fear a shortage.
By now, I think we understand the need to “flatten the curve” of people contracting the virus to keep demand for emergency medical services manageable. Letting prices reflect changes in demand for goods (market pricing) will help “flatten the curve” of supplies:
- The temporarily higher prices will make people less likely to hoard (shortages less likely)
- The temporarily higher prices will invite more supplies in, quicker (shortages less lengthy)
- Bringing in more supplies will allay people’s fear of running out of supplies, bringing short-term demand back down, and bringing prices back down sooner
Most importantly, market pricing helps ensure necessities are still available to people who need them, not just to people who can get to retailers first. Remember: all too often the ones with the deepest needs aren’t the ones most able to get to the stores.
Finally, anti-“gouging” laws waste the attorney general’s time and make people suspicious of their natural allies in retailers and enterprising neighbors. During Hurricane Florence, the AG’s office received 712 complaints of “gouging,” most of which were questionable and also duplicative.
The anti-“gouging” law makes shortages more likely, makes shortages more extensive, makes people more suspicious, discourages outside suppliers and quicker restocking, and penalizes enterprising people bringing in additional supplies. It’s not a law for a free society. […]
Thanks for trying to bring some much needed attention to this issue, Mr. Clifton. More importantly, we ALREADY have a “price gouging” law on the books here in NC, NCGS 75-38, that is causing actual damage NOW and it needs to be repealed. Sen. Tillis done lost his mind if he thinks pushing the same stupidity on a national level is a good thing.
Even though North Carolina is currently dealing with a disaster situation that is unlike any disaster we’ve dealt with in generations, we’re still seeing the same shortages on store shelves we see during any other disaster; however, the current shortages are now statewide instead of being limited to an isolated part of the state. These statewide shortages are, in large part, a result of NCGS 75-38, our state’s “price gouging” law which prohibits prices from rising during a declared disaster. The practical effects of “price gouging” are very well documented, and the brief summary above by economist Jon Sanders at JLF provides additional information. Not only does NCGS 75-38 place arbitrary price ceilings on goods thereby reducing the need for consumers to reduce their demands on existing goods (e.g., toilet paper and hand sanitizer), it encourages the Attorney General to turn citizens against each other by actively soliciting consumer complaints on social media and during press conferences. It also hurts small retail businesses that don’t have access to the same supply chains or that can’t afford to sell inventory at a loss at the same levels as larger retailers or national chains. How can a state that actively profits from a monopoly on the lottery, which hurts the poor more than any other group, at the same time claim to be concerned about the ability of the poor to obtain goods during a declared emergency while supporting “price gouging” laws that have the opposite effect?
Conservatives should all appeal to the NCGA to immediately seek repeal of NCGS 75-38 before the next declared emergency in North Carolina which would allow prices to perform their proper function of rationing goods so statewide shortages aren’t as prevalent and which would stop turning citizens against each other. I understand there is almost zero political will to get this done because of how difficult it would be to explain this concept to most of the general public, but that is no excuse to allow a harmful law to remain in effect. To quote Dr. Thomas Sowell quoting Joseph Schumpeter, “’Price gouging’ is one of those emotionally powerful but economically meaningless expressions that most economists pay no attention to, because it seems too confused to bother with. But a distinguished economist named Joseph Schumpeter once pointed out that it is a mistake to dismiss some ideas as too silly to discuss, because that only allows fallacies to flourish — and their consequences can be very serious.”
The Republican Party is supposed to be the party of limited government and free markets – NCGS 75-38 violates both principles.
Eric: You make a lot of sense. But don’t expect Tillis or the NC Republican RINO leadership to follow your suggestion. If you haven’t noticed, they are basically brain dead when it comes to conservative policy. They won’t be in power after November— and deservedly so.
The NC GOP makes a mockery of ‘to be rather than to seem’
Counterpoint to your extremely rational article: allowing for price gouging would cause social disruption and even risk vigilante justice.
Please don’t get me wrong. Conservative libertarianism continues to amaze me because when one asks what its position would be on any given subject, that position always turns out to be the rational one. But notice how I have use the word “rational” twice (three times?), now. Because unfortunately, people are not rational. Price gouging laws are a good thing because they would prevent the inevitable social disruption.
From a conservative libertarian with whom no one agrees.