The controversy surrounding the most notable economic pledge of Vice President Kamala Harris, the Democratic presidential candidate, is continuing. Harris plans to curb inflation by banning price gouging on groceries.
However, depending on how to define and prohibit the baggage fee, the economic effects can vary greatly. The line between the baggage fee and the power of the capital market can be very vague, and preventing the baggage fee is not easy, the economic media outlet Wall Street Journal (WSJ) reported on the 20th (local time), citing economists.
The U.S. food industry has strongly opposed Harris’s plan, arguing that inflation is due to supply chain disruptions caused by the pandemic-induced economic restructuring and a surge in demand due to government spending. Former President Donald Trump, the Republican presidential nominee, has denounced Harris’s plan as “communist price controls.”
Economists cited by the WSJ noted that identifying and tackling price gouging, except in extreme cases, is not easy.
This is because regulations prohibiting price gouging can effectively be price controls. Imposing a price ceiling on a product can discourage sales, which can lead to a shortage. Rent control, the most common example of a price ceiling in introductory economics textbooks, is considered by many economists to be a bad idea, the WSJ reported.
The economic effect of price control, such as the ban on gouging, is also unknown. In the case of extreme emergencies such as natural disasters, Florida stipulates that “any act of renting, selling, leasing, or offering to rent essential commodities, housing, or private storage facilities at unconscionable prices is unlawful.” Immediately after the coronavirus, Trump also issued an executive order to prevent price gouging on medical supplies.
In an extremely emergency situation, raising prices is predatory because supply is limited to the amount of stock held by companies. The mask shortage immediately following the coronavirus outbreak is a similar case.
But economists stress that the signals sent by prices are important, the WSJ reported. A spike in the price of bottled water on an island hit by a hurricane could create an incentive to get supplies quickly, while artificially lowering prices during a water shortage could encourage hoarding.
Economists limit their acceptance of price controls to natural monopolies, notes Harvard economics professor and author of an introductory economics book, Greg Mankey.
The problem is that the food business is not a monopoly. If one store raises prices too much, consumers can choose another store. “Companies are always greedy,” said Professor Mankey. “It is the power of competition to keep prices close to cost.”
Harris also pledged to increase competition, the WSJ reported. Harris described her economic plan as “a package of new penalties for opportunistic companies that exploit the crisis and flout the rules, while supporting small food businesses that play by the rules and get ahead.”
The price stabilization policy Harris wants could be well-received by economists because it increases competition but does not rely on setting price ceilings, the WSJ added.
(Seoul = News 1)
-
- great
- 0dog
-
- I’m sad
- 0dog
-
- I’m angry
- 0dog
-
- I recommend it
- dog
Hot news right now
2024-08-21 17:44:27