If we had Kamala Harris's price gouging policy in place, would we still be able to buy eggs at $2.30 a dozen. Probably not. Most likely not. I say most likely not, because some store might figure out a way to bring in the same amount of money by spreading out the real cost of eggs over a lot of other goods to bring in the money necessary to sell eggs at a loss. This cost shifting may work for a while leading to other distortions in market prices. More likely than not, there would simply be no eggs available to purchase if prices did not rise.
The reason for the price increase is not price gouging according to the Hill report but is attributed in part to high demand for the product. Also, it is largely due to the bird flu outbreak at chicken farms in Colorado in July. The Hill article quotes Phil Lempert, a grocery industry analyst as saying, “Bird flu is the number one reason for higher prices, absolutely.”
If Harris's Price Gouging Board was in place, would they accept that explanation and determine that an increase in the price of eggs was justified or would they assume any price increase is price gouging? I don't know. If they take a change in price as proof of price gouging, that would be easier to administer than examining each product that has a price change to determine if a price change was justified. We already have the Consumer Price Index to track price changes. If instead of just assuming a price increase is gouging and instead if the Price Gouging Board must determine if a price change is justified, that will be a lot of work. I doubt they would just accept Phil Lempert's word for it.
There are dozens of factors, no doubt, that go into the price of a product. If you think about eggs, there is the cost of labor, chicken feed, veterinarian services, packaging, advertising, and transportation, and interest rates on borrowed money, and the list goes on and on. And then you have different kinds of eggs: brown, extra large, jumbo, large, medium, small, cage-free, free-range, GMO-free, and combinations of these like free-range extra-large GMO-free brown eggs. I assume each product price differential would have to be justified. To make their life easier, producers and retailers would probably reduce the number of choices of eggs.
Not only eggs, but everything you buy in the grocery store would have to have the same scrutiny. To determine if every price change was justified would take an army of new bureaucrats. How many? I don't know. The IRS has about 83,000 employees. I think the Price Gouging Board would have to have about ten times that many. And how would this new agency be paid for? A fee could be assessed the grocery stores, which of course, would lead to an increase in the price of eggs.
Studies to determine if the price increase in eggs was justified, would take time. It could not be done overnight. So, would the study have to be done before the price is increased or after? If before, while waiting, the egg producer with no cash flow could not feed the chickens and they would just have to die. That would lead to fewer eggs and most of us would be unable to buy eggs simply because there would be none for sale. If a producer had the recourses to absorb the increased cost while waiting for a price approval increase, then that would be more cost to figure into the reason for a price increase. I could explain that, but I assume you know that drawing down cash comes with a cost.
So, if the grocery store gets their price increase and then the egg industry recovers from the bird flu episode that caused the price increase, the store would lower the price back to what it was before, right? No, not likely. The store would not want to risk losing the right to again raise the price the next time fuel prices went up or labor cost when up, or some other factor in the cost of production, so the store would likely keep the higher price.
So, if the grocery store gets their price increase and then the egg industry recovers from the bird flu episode that caused the price increase, the store would lower the price back to what it was before, right? No, not likely. The store would not want to risk losing the right to again raise the price the next time fuel prices went up or labor cost when up, or some other factor in the cost of production, so the store would likely keep the higher price.
I don't think this price gouging policy idea has been thought out very well.
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Great point, Rod. The law of supply & demand - lower the price artificially (by force!), increase demand. And the other effect (when done by force) is to suppress supply.
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