The Dumb and Dumber of Kamala’s ‘Greedflation’ Narrative
Democratic presidential candidate Kamala Harris’ new call to regulate food prices and block mergers has drawn enormous flak from economists, given the poor track record of price controls. Democrats think they can make political headway with a “greedflation” narrative, blaming rising prices on business profit-seeking.
There are both disreputable and respectable versions of this narrative—dumb and dumber, if you will—but they both run into the same problem: the evidence is against them. The dumber version, the one no economists endorse, says corporations got especially greedy, which made prices go up. If this were true, we could explain surges and drops in inflation as an effect of surges and drops in corporate greed. Since greed is limitless, prices would never drop and this is clearly at odds with observable facts and history.
The merely dumb, or at least more respectable, version says that the American economy has become more monopolistic over time, and that is why businesses have been able to raise prices more. Consumers are the victims of a lack of competition. Harris nodded toward this explanation in her speech announcing the new policy, perhaps in response to early criticisms from economists.
Of course, it is absurd to believe that monopolies have developed so rapidly in the last three years that this caused the surge in inflation.Â
Putting that aside, while few economists would endorse price controls as a solution to insufficient competition—except for true natural monopolies—some would endorse blocking mergers through antitrust policy. The epicenter of the new optimism about antitrust is probably the Stigler Center at the University of Chicago. “The fact that you have prominent people at Chicago calling for antitrust enforcement is changing the game,” says law professor and The New York Times writer Tim Wu.
There aren’t many good case studies of successful antitrust enforcement. Indeed, mergers often create more competition, as when the recent T-Mobile/Sprint merger created a successful wireless network to compete with AT&T and Verizon. Evidence shows the merger raised wireless speeds and expanded 5G availability. Fortunately, the Obama administration did not block the merger (although they did delay it).
But one stylized fact s
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