An Auction on Stolen Goods

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Baltimore’s highly late sage, Henry Louis Mencken:

The state — or, to make matters more concrete, the government — consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office.

Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing.

The tenth time it is made good by looting ‘A’ to satisfy ‘B’. In other words, government is a broker in pillage, and every election is a sort of advanced auction on stolen goods.

For a finer telling of democratic elections… we search in vain.

What is government but a broker in pillage? And what election is not an advanced auction on stolen goods?

A and B

Let us label the grocery industry ‘A.’ Let us label grocery patrons ‘B.’

The aspiring Democratic nominee — Harris — wishes to pillage A for B’s benefit.

That is because A is allegedly “price gouging” B into impoverishment.

Yet A, grocers, claim a lean, lean profit margin of 1-2%.

Does a 1-2%% profit constitute a gouging?

United States defense contractors boast profit margins of 11-13%.

And what is the profit margin on the hammer sold to the Department of Defense for $500?

Where are the sobs about their profits? They are absent entirely from the Democratic National Convention presently going in Chicago, Illinois.

Instead, A, with its infinitesimal profit margin, this is the mighty fee-fi-fo-fum to scotch.

It is A that must be pillaged.

The Cure Is Worse Than the Disease

The cure for price gouging is of course price control.

And the cure is worse than the original ailment.

Goods shortages are the cure’s inevitable side effect.

Assume a simple bread loaf.

Assume it costs a baker $2.75 to manufacture. Assume further that it hawks the thing for $3 — for a 25-cent profit.

Yet now the governing authorities come oafing in.

They insist that A — the baker — is gouging B, the purchaser.

The authorities impose a $2.50 limit on the bread loaf.

“Fantastic!,” shouts B. “That greedy SOB’s been ripping me off. It’s just not fair.”

Yet what of A?

Incentives Matter

He must still expend $2.75 to produce his bread loaf. Yet he can only offer it at $2.50.

That is, he must lose 25 cents on each purchase.

Why then would he bake this theoretical bread loaf at all?

He stands not one thing to gain from it. He can only lose from it.

And so unties his apron… discards it upon the floor… and walks away.

The result is a lovely shortage of bread.

B, initially gratified by the price decrease, soon discovers the shelves are empty of bread.

He wants to eat it but he cannot find it — not at this baker, not at that baker.

He can no longer munch bread due to the very price control introduced for his benefit.

To this we must add an ironic twisting of events.

Bread demand leaps to stratospheric dimensions. Yet bread supply gutters due to price control.

What happens to prices when demand vastly outraces supply?

Prices for the limited items that do remain spiral up and away to meet that demand.

Thus the price control implemented to benefit B now tortures him.

How does he like it now?

Welcome to the Soviet Union

Milk, meat, produce, candy, crackers, multiply this one example across them all.

We can only conclude that price controls yield catastrophes. And for the identical reason — they war with the profit incentive.

And once government imposes price controls, it finds it must impose additional price controls to confront the difficulties of the originals.

The enterprise must fan and fan in cascading directions throughout the economic structure.

That is, it must ultimately erect limits on all input costs, all labor costs.

Before long it must seize control of the entire economic apparatus.

You now have the Soviet Union on your hands.

A “Petrified Totalitarian Economy

Henry Hazlitt is the author of the 1949 Economics in One Lesson. From which:

The natural consequence of a thoroughgoing overall price control… must ultimately be a completely regimented economy. Wages would have to be held down as rigidly as prices. Labor would have to be rationed as ruthlessly as raw materials.

The end result would be that the government would not only tell each consumer precisely how much of each commodity he could have; it would tell each manufacturer precisely what quantity of each raw material he could have and what quantity of labor.

Competitive bidding for workers could no more be tolerated than competitive bidding for materials. The result would be a petrified totalitarian economy, with every business firm and every worker at the mercy of the government, and with a final abandonment of all the traditional liberties we have known.

For as Alexander Hamilton pointed out in the Federalist Papers a century and a half ago, “A power over a man’s subsistence amounts to a power over his will.”

Mission Creep

What is more, the price control effort undergoes a sort of mission creep:

It is seldom, moreover, that any honest effort is made by the price-fixing authorities merely to preserve the level of prices existing when their efforts began. They declare that their intention is to “hold the line.”

Soon, however, under the guise of “correcting inequities” or “social injustices,” they begin a discriminatory price-fixing which gives most to those groups that are politically powerful and least to other groups.

Is this not the “equity” we have heard so much of in recent years? More:

What lies at the base of the whole effort to fix maximum prices? There is first of all a misunderstanding of what it is that has been causing prices to rise. The real cause is either a scarcity of goods or a surplus of money. Legal price ceilings cannot cure either.

A surplus of money?

Is food inflation the consequence of “price gouging”… or the oceans of dollars which which the Ms. Harris’ administration has flooded the United States?

We harbor very strong suspicions that it is the latter, not the former.

A, B and X

We have referred to parties A and B. Here the abovesaid Mencken introduces party X:

Whenever A annoys or injures B on the pretense of saving or improving X, A is a scoundrel.

In the present context A is the sitting vice president of the United States… and aspiring future president of the United States.

B is the annoyed, injured grocer.

X is whom A would save or improve.

What — then — does that make Harris?

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