Kamala Harris’s Price-Control Delusion

Consumers inevitably would end up paying via shortfalls of supply and reductions in quality

By Donald J. Boudreaux and Richard B. McKenzie. Excerpts:

"Mandatory price controls, while keeping nominal grocery prices from rising, would raise the real cost of groceries by reducing supplies and product quality below consumer demand."

"If sticker prices were prevented from rising as grocery supplies fall, stores would raise nonsticker prices. “Shrinkflation”—when companies keep prices the same but shrink the portions of goods—is the most familiar example. Stores can also make nonprice adjustments, such as passing off “select” grade steaks as higher-ranking “choice” grades or slicing bacon thinner. (Gasoline stations were widely rumored to have done much the same—filling “premium” tanks with “regular” gasoline—during the Arab oil embargo in 1973-74.) Stores may also hire fewer cashiers, devote less effort to cleaning produce, or reduce hours of operation.

Price controls could also lead to food shortages if producers withhold goods from the market because they’re unable to obtain reasonable prices. This would mean more empty shelves, forcing shoppers to incur greater search costs, such as repeated trips to the store."

"In competitive industries like grocery retailing—whose profit margin is only 1.6%—the quality-adjusted prices of products subject to price controls would likely be higher than the uncontrolled sticker prices."

"grocery stores aren’t monopolies—Americans can easily switch from Safeway to Whole Foods to Trader Joe’s. Even if they were, government intervention still wouldn’t be the answer. Monopolists are just as willing and able as are competitive firms to respond to sticker-price controls with nonsticker-price adjustments."