Thread by @MichaelGiberso3

When you ignore the considered views of scholars in a field, you rarely reach a well-considered view. But experts can be wrong, so let us consider @ZephyrTeachout ‘s Atlantic article.🧵1

I have written on price gouging laws and I am an economist—I may be exactly the sort of expert that our law professor-essayist wants you to ignore. You are warned. 🧵2 theatlantic.com/ideas/archive/…

In brief, Teachout makes several claims, not entirely self-consistent, which do not reflect the ways prices against price gouging get enforced in the states that have them. A few responses to the article.🧵3

The “know it when you see it” quality emerges because some states use vague prohibitions against unconscionable price increases and leave it to judges to decide whether a price increase was, in retrospect, too much. (Some states do state an exact % increase allowed).🧵4

Teachout says the laws have four common features. Legal scholarship has identified eight points of interest. This Skarbek & Skarbek law review article provides a good review.🧵5 heinonline.org/HOL/LandingPag…

The standard price gouging story is a few folks and a truck selling ice brought into a town where power was out. These folks are increasing supply. Price spikes don’t always trigger supply increases, but should the law penalize folks increasing supply?🧵6 econlib.org/library/Column…

Contrary to her concern about barriers to entry and high concentration, the history of price gouging law enforcement in NY is a history almost entirely devoted to penalizing small businesses. Hardware stores, motorcycle dealers, gasoline stations, and convenience stores.🧵7

NY case: Hardware store in Chazy NY had 1 generator in stock when ice storm left area without power, they bought 54 generators from out of state, sent a truck to get them (increasing supply!) and sold at prices intended to cover costs. State sued them.🧵8 casetext.com/case/people-v-…

The judge commended the hardware store for its community service, but said the law compelled a judgment against it. Teachout says stores can recover costs, but in practice states pick and choose, as here when the costs of retrieving and selling the generators were discounted.🧵9

One of the big businesses targeted by New York was egg producer Hillandale Farms, with about 6% of the national egg market. Antitrust economists tend to think of a 6% market share as no big deal. Is this “poor man’s antitrust,” or just poor antitrust?🧵10 ag.ny.gov/press-release/…

Speaking of antitrust, so far as I know no price gouging enforcement action has put any substantive effort into defining the relevant market to establish the possibility of even temporary market power. Who needs evidence when “you know it when you see it”? 🧵11

Another big business NY has gone after was Quality King, a wholesaler. While case was dismissed by the first court, the dismissal was overturned on appeal. It is “actually a well-developed body of law” where some judges “know it when they see it,” but others don’t.🧵12

Quality King settled with NY to end litigation. Settlements are common. Litigation can be more expensive than state's penalties, making it prudent to buy off the state. In the Hillandale case the company donated 1.2 million eggs to food banks and the AG gets to claim credit.🧵13

In TN, 16 gasoline retailers charged with price gouging settled immediately. One chain resisted any admission they gouged their customers but after a year settled, saying paying $57,000 to state would be well below the costs of continuing litigation.🧵14 knowledgeproblem.com/2010/05/06/ten…

In some states the laws are triggered by an official declaration of emergency. New York is vaguer, referencing an “abnormal disruptions of the market.” Ultimately judges decide when disruptions begin and end. Exact dates sometimes matter, but businesses in NY can only guess.🧵15

A common claim is temporary price controls means everyone has a equal chance to get goods, but it just means whoever gets to the store first wins. Consider: Suburban stay-at-home parent with an SUV vs poor parent with two jobs relying on public transportation. 🧵16

A study of post-earthquake shopping found households able to shop right away purchased much more right after the event than households facing costs of shopping. High income earners have high time shopping costs, but they can pay someone else to shop. 🧵17 econpapers.repec.org/paper/hitrcesr…

Teachout says a “problem with price-gouging laws is that they exist only at the state level,” but it is also an opportunity. The variation makes testing claims empirically easier to do. Before rolling out the laws nationwide, maybe advocates should find out if they work.🧵18

There a more objections to be made against price gouging policy, some I wrote about in an article appearing in Regulation magazine.🧵19 cato.org/regulation/spr…

I also recommend @Mattzwolinski's work which tackles the ethics along with the economics. Here is one paper: 🧵20papers.ssrn.com/sol3/papers.cf…

I haven’t said anything about Kamala Harris’s proposal because so far as I am aware there is no real plan yet. She said: “I will work to pass the first-ever federal ban on price gouging on food.” I wonder if she has reasons to think it will work.🧵END whitehouse.gov/briefing-room/…