THERE SHE GOES AGAIN.

It wasn't enough for Zephyr Teachout to write a silly defense of price-gouging laws for The Atlantic, she had to write a similar essay making the same mistakes for The Washington Monthly.

While price gouging bans are not novel nor particularly problematic, they represent a deep and wise recognition that educated Americans in the libertarian era that began with Ronald Reagan don’t recognize: that the “invisible hand” of the market doesn’t always exist in reality as it does in platonic form and that the magical “price discovery” promised by keeping government out of the way doesn’t always work. All markets have rules and need them, and they need rules not just about quality and safety but also about power and exploitation. As president, Joe Biden surprised many by breaking with market fundamentalist thinking and becoming the greatest trustbuster our country has seen in 50 years. Harris’ price gouging announcement suggested she would not turn away from the path he forged but instead embrace it and make a powerful legacy of a new—and old—vision of economics, one which puts power problems at the core.

Half a century ago, Charles Peters's Monthly articles were cheerleading for Jimmy Carter, and they're fine with the Jarrett regency, whether it's Dementia Joe or the ditzy valley girl as figurehead, serving up more malaise.  In like manner, Mx Teachout serves up the same sloppy thinking to Monthly readers that The Atlantic ran.

Price gouging laws in America are based on the insight that there are situations where the asymmetry of power and information is too great to allow the price that “emerges” from those dynamics to go unregulated. During emergencies, companies can effectively set whatever price they want, using disaster as leverage to reap windfall profits. When a hurricane shuts down all the electricity in a community, for instance, the grocery stores with generators could hike their prices manyfold, knowing that families with refrigerated food will have to pay the new prices or their children will go hungry. Such predatory behavior happens, but it is far less prevalent than it would be because grocers and other retail sellers know they can be investigated and charged with price gouging.

Free market thinkers object to anti-price-gouging statutes as damaging interference with laws of supply and demand. Severe price hikes, they argue, are valuable market signals that alert investors and companies that there is money to be made in expanding capacity to produce more of the needed goods. The problem, as I recently noted in The Atlantic, is that when a spike in demand is clearly the result of a temporary emergency that will recede once the situation returns to normal, producers have little incentive to expand capacity. Rather, it’s in their interests to merely jack up prices and enjoy the higher profits while they last. Anti-price-gouging laws are specifically tailored for precisely these scenarios.

It's not about "expanding capacity," it's about using transportation. To move goods from where their marginal valuation is relatively low to where their marginal valuation is higher. And somebody has to be willing to pay that higher price.  Somewhere Zephyr's train of thought derailed.  Would she rather have those transactions be relatively transparent, or must the buyers with higher marginal valuations make side payments or hire private transportation or otherwise exercise creativity?  Oh, you could expand the laws to deal with such situations, you know, confiscate inventories of hoarders, send speculators to Gulag, maybe make example of rich Jew or two, you get the idea.

From there, he goes on to serve up more malaise, in the form of competition policies based on the old structure-conduct-performance paradigm, with some predatory pricing thrown in just for fun.  Egad.  Let us draw the curtain of charity over that continuation.

I'll let Michael "Kids Prefer Cheese" Munger caution policy wonks against running with price scissors.

The most fundamental problem, though, is the naïve equating of price changes with cost changes. The logic seems to be that the only legitimate change in prices must come from and be proportional to, changes in cost.

There is no economic basis for such a rule. Cost and price may move together over longer periods of time, but in any period of a few months the price is mostly determined by consumers. This conclusion is not ideological, it’s not controversial, and it dates to one of the giants of economic theory:  Alfred Marshall.

Yes, and in a very short period of time it is the subjective valuation of consumers that governs the price that would ration the available supply and make importation from more distant sources of the good worthwhile.  "Marshall’s insight is timeless: in the short run, consumers are generally buying from other consumers, not from producers."  Choose wisely: will consumers buy from other consumers in a transparent way, or in a roundabout way, or not at all?