PLENTY OF EVIDENCE suggests Americans have gotten worse at correctly estimating market prices over the past five decades. Reviewing the history of the one-bid "Contestants' Row" game on "The Price Is Right" since 1972, economist Jonathan Hartley found that contestants' underestimates of prices have gotten larger over time. One potential cause, Hartley muses, is that new technologies, such as price comparison websites, mean people have less need to track closely nowadays. So, we pay less attention to prices and how they change--which is curious, because, as this COVID-19 pandemic rolls on, lots of the public and politicians suddenly find themselves not just experts in what market prices are, but what they should be.
By all accounts, the Virginia Attorney General's office has received more than 400 complaints about "price gouging" during the pandemic--that is, instances where prices for "necessary goods and services" have been deemed by members of the public to be much higher than prior to the emergency. Twitter is full of complaints about prices being charged for hand sanitizer and masks, but also entertainment goods, with anger at Nintendo Switches being sold for as much as $900.
Lots of states already have anti-price gouging laws for emergency situations, but with stories about packets of hand sanitizer, usually around $10 to $12, selling for as much $350, national politicians are now keen to step in.
Rep. Jerrold Nadler (D.-N.Y.) and colleagues in the House want a nationwide antiprice gouging law giving the Federal Trade Commission powers to punish companies if their product price today "grossly exceeds" either the price at the end of last year, their competitors' prices, or a price sufficient to account for any increased costs the business faces. Sens. Kamala Harris (D.-Calif.) and Elizabeth Warren (D.-Mass.), meanwhile, want a national law that bans price increases of more than 10% during national emergencies.
The implicit message of such proposed laws is clear: market prices set prior to emergencies are good, fair, and reasonable; market-set prices after the onset of one are bad, unfair, and unreasonable. At least, that is, if they go up significantly. When prices plunge, as they have for flights, restaurant food, and clothing during this crisis, nobody seems to believe that consumers are gouging or swindling companies. Our politicians have very asymmetric thinking.
It is as if lawmakers such as Warren and Harris believe supply and...