Food prices have increased by over 20% during the Biden-Harris administration, prompting Vice President Kamala Harris to propose a federal ban on price gouging in the food industry. However, some economists argue that this solution may create more problems than it solves. Anti-price gouging laws implemented in some states during the pandemic actually motivated people to buy more goods than they would have if prices had increased naturally.
Economists like Gavin Roberts believe that in most cases, the best response to high prices is no action. Allowing prices to rise naturally can lead consumers to seek alternatives, thereby keeping products available for those willing to pay the higher prices. Harris’ proposal may hinder competition in the food industry by preventing new entrants from taking advantage of profit margins and potentially lowering prices in the long run. Jason Furman, a former Obama administration economist, agrees that anti-price gouging policies could inadvertently harm consumers.
Roberts suggests that Harris investigate barriers preventing new parties from entering concentrated industries rather than pursuing price-gouging bans. Harris also plans to allocate additional resources for the federal government to address price-fixing and anti-competitive practices in the food and grocery industries. Campaign staff have not responded to criticisms of Harris’ proposal, pointing to her speech and the fact sheet shared prior to it.
The impact of price gouging on inflation remains uncertain, with conflicting research and opinions on its role. While some believe that alleged corporate price gouging has not been a primary driver of inflation, others argue that there is a direct link. Factors contributing to inflation over the past few years include the war in Ukraine, government spending, and pandemic-related disruptions in the economy. The unprecedented strain on supply chains during the pandemic significantly contributed to the rise in inflation in early 2021.
Despite criticisms, Harris’ proposal has garnered support from some, such as Lindsay Owens of Groundwork Collaborative, a progressive think tank, who views it as a positive step. Owens believes that the price gouging statute will not result in shortages and can give government agencies more authority to address high prices charged by certain actors. Overall, the debate around price gouging and its impact on inflation continues, with differing opinions on the best course of action to address rising food prices and ensure a competitive market for consumers.
