In May 2012, the IGM Forum, based at the University of Chicago Booth School, did a poll of economists on a proposed anti-price-gouging law in Connecticut. The economists polled were on the IGM's panel of "experts." To clarify, the vast majority of economists on the panel are experts in their own field. Their knowledge of items outside their field, as much of the polling data on many other issues show, ranges from very good down to sketchy.
Here's the exact wording of the statement with which the economists were asked to agree or disagree:
Connecticut should pass its Senate Bill 60, which states that during a "severe weather event emergency, no person within the chain of distribution of consumer goods and services shall sell or offer to sell consumer goods or services for a price that is unconscionably excessive."
Now here's the good news: Only 8% of the economists polled agreed or strongly agreed. 51% of those polled disagreed or strongly disagreed.
Moreover, when they were asked to weight their answers by their confidence in their answers, the results shifted strongly toward opposition. 7% agreed or strongly agreed. But 77% disagreed or strongly disagreed.
Some of the economists acted like lawyers. David Cutler, a health economist at Harvard, opined:
Without defining "unconscionably," I don't know what to think about this.
But no one knows what "unconscionably" means. That wouldn't stop the enforcers. Does Professor Cutler really have much doubt about how such a law would be enforced? As Richard Schmalensee of MIT pointed out, "unconscionably" is a bug, not a feature. He wrote:
Seeks to prevent prices from clearing markets; never a good thing. Standard is hopelessly vague so increases risk for affected businesses.
Richard Thaler of the University of Chicago expressed thoughts similar to ones I wrote recently in criticizing his more recent statement. I had written:
As I pointed out in my interview, by allowing price gouging, we get, to some extent, the best of both worlds. We get the traditional merchants like Wal-Mart, who worry about reputation, stocking certain supplies in advance and not raising prices. We also get the fringe, one-time suppliers, bringing in more supplies in response to the higher prices they can charge.
Thaler said it more succinctly, writing:
Not needed. Big firms hold prices firm. "Entrepreneurs" with trucks help meet supply. Are the latter covered? If so, bad.
I wish he had said that in his recent radio interview. Of course, it's possible he did but that the Marketplace producers cut that portion.