I hope President Biden doesn’t show up for his State of the Union address on Thursday with a Snickers bar. Politico reported last month that Biden abruptly asked people at a dinner whether they had “seen that article about the Snickers bars,” an apparent reference to this guest essay in The Times about why voters are so upset about inflation.
Biden is obsessed with high prices because voters are, and he knows that to beat Donald Trump in November he needs to make a strong case that he’s wrestling inflation to the ground. I get that.
But there are good ways and bad ways to fight inflation. One of the bad ways, I think, is to put the blame on price gouging and corporate greed, as Biden has done on numerous occasions.
Gouging refers to abrupt, extreme price increases to take advantage of temporary scarcity, often accompanied by hoarding. The classic example is a lumber yard that jacks up the price of plywood when people need to board up their windows before a hurricane. There are laws against that.
Gouging isn’t a good umbrella term for price increases of all kinds. You actually want the price of something to go up when there’s a long-term imbalance of supply and demand. The high price signals to suppliers that they should produce more of the thing and to buyers that they should consume less of it. Over time, in a competitive market, those two adjustments will bring the price back down. As the saying goes, the best cure for high prices is high prices.
As for corporate greed — well, corporations didn’t suddenly change personalities. They have always sought to maximize profits. So it’s not a good diagnosis of what ails America now. For that reason, Isabella Weber, an economist at the University of Massachusetts at Amherst, prefers the term “sellers’ inflation,” which is the ability of big companies to raise prices when they expect their competitors to do the same.
