In Paul Krugman’s latest column, he claims that Kamala Harris hasn’t advocated for price controls, only a ban on price gouging on groceries. Of course, these are the same thing. Krugman’s own principles text defines price controls as “legal restrictions on how high or low a market price may go.” A ban on price gouging is a legal restriction on how high a market price may go. Therefore, even Krugman-the-textbook-author admits that a ban on price gouging is the same as a price ceiling.
In his column, he gives examples of price gouging: “Texas prohibits many businesses from ‘demanding an exorbitant or excessive price’ on things including food and fuel during disasters,” “voters hate it when businesses take advantage of shortages to charge very high prices,” and “some of us still remember the California energy crisis circa 2001, when power producers reduced supply to drive up electricity prices.” Krugman is implying that a crisis constitutes an exception—it’s not a price control if it is implemented in response to a crisis.
But then, if you look at his textbook, he provides these examples of price ceilings: “price ceilings are typically imposed during crises—wars, harvest failures, natural disasters,” “the U.S. government imposed ceilings on many prices during WWII,” and (this will sound familiar) “Price controls were imposed on California’s wholesale electricity market in 2001, when a shortage created big profits for a few power-generating companies but led to higher electricity bills for consumers.”
Krugman-the-textbook-author says the California energy crisis episode was an example of a price control, but Krugman-the-columnist says it’s not a price control; it’s just a ban on price gouging.
I’d be surprised if it wasn’t Krugman, but this kind of doublespeak is par for the course for him.
In his textbook, Krugman lists all the well-known problems with price ceilings. He says price ceilings result in “inefficiently low quantity,” deadweight loss, the creation of winners and losers, “inefficient allocation to consumers,” “wasted resources,” “inefficiently low quality,” and the emergence of black markets. He says that governments may impose price ceilings because they don’t understand basic microeconomics.
But now, Krugman-the-columnist has changed his tune. In his column, he writes, “you can consider it reasonable to have legal restrictions on price gouging.”
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