A Pandemic of Economic Illiteracy.

• Author: Hinkle, A. Barton

Biden Targets High Shipping Costs as Pandemic Ravages Global Supply Chains," the Washington Post reported this summer. The article noted that the increase in shipping charges had roots in several factors. The White House, however, focused on one: "Biden's aides acknowledge that the pandemic is responsible for much of the disruption," the Post reported. "But they say the lack of competition enabled cargo carriers and railroads to exploit the pandemic by driving prices to historic highs."

Shipping is far from the only realm in which charges of pandemic price-gouging have appeared. A quick Google search yields an abundance of studies, news articles, complaints, and reports. Yet, while complaints that private enterprise is exploiting a global crisis to price-gouge have been a steady drumbeat since COVID-19 first landed on U.S. shores, similar charges have been made for decades. The first state to enact a price-gouging law was New York in 1979. Today, according to the National Conference of State Legislatures, 39 states, Guam, Puerto Rico, the U.S. Virgin Islands, and the District of Columbia prohibit price-gouging during disasters.

When the COVID-19 pandemic hit, so did an epidemic of government attempts to rein in higher prices. (See "How California's Price-Gouging Order Can Cause More Deaths," Summer 2020.) In D.C., Sen. Elizabeth Warren (D-Mass.) introduced a bill to stop pandemic price-gouging. In Minnesota, lawmakers in the House passed a similar measure. Around the country, governors invoked anti-gouging legislation already on the books. In New York, just for good measure, the legislature passed additional price-gouging legislation to stop "virus profiteers."

The problem with such measures is well-known: lawmakers can't repeal the law of supply and demand. High prices incentivize suppliers to send goods and services where they are needed most. At the same time, high prices disincentivize hoarding, which helps ensure that scarce supplies are more evenly distributed. (It's a fair bet, for instance, that some Americans are still whittling down the stockpiles they amassed during the Great Toilet Paper Rush of2020. Trying to prevent "greed" by sellers only facilitates greedy behavior by buyers.) Depressing prices by fiat counteracts those worthwhile aims.

You might say economic illiteracy is a form of contagion itself, with strains of varying transmissibility and lethality.

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