Shopping during coronavirus: Higher prices aren't the problem, shortages are

The R-word: rationing. For many, it brings to mind bread lines, death panels, gas queues. These all result from government-imposed price controls, leading to market distortions and unnecessary human suffering.

But because no resource is unlimited, rationing itself in some form is crucial to the operation of any economy. Consumers' needs and desires are infinite; goods and services are not. Only the interplay of supply and demand can make the most productive use of scarce resources.

When demand exceeds supply for a given commodity, a rise in price signals a shortage (and an opportunity) to producers, leading to greater production. The process prevents shortages that would develop if the price did not accurately reflect circumstances.

As increased production rises to meet demand, prices fall to a level where consumer demand has been fulfilled as much as possible under real-world conditions, including real-world constraints that cannot be wished out of existence.

However, when political officials such as Gov. Tim Walz seek to alleviate rising prices via executive diktats against "price gouging" (a term with no meaning in economics), and Attorney General Keith Ellison deploys secret informers to report on those reacting to real-world conditions, the signals and incentives to increase production are blocked, resulting in unnecessary shortages and consumer hoarding.

Admittedly, this may be partly mitigated by producers unilaterally increasing production despite lacking sufficient information (through price movements) to optimally match supply with actual demand. They might do this due to altruism or a wish to maintain public goodwill, or some combination. Even so, guesswork will likely lead to either continuing shortages of the good in question or to overproduction of that good and shortages of others.

Stores also may implement their own rationing regimes — e.g., limiting the quantity of a particular item per customer. This will still lead to shortages, as those with more time and greater access to transportation to the store will be able to buy up the limited supply, either individually or with the cooperation of others, while the poorer and more time-constrained will be left empty-handed.

The cumulative effect of the several clauses of Walz's executive order 20-10 is to establish unlimited discretion to define "unconscionably excessive" prices, and how they are enforced; such plenary powers undermine due process, a cornerstone of liberal democracy, which is swept away under the pretext of emergency conditions. There is no trial by jury, only the unilateral and arbitrary declarations of the attorney general.

One may presumably appeal decisions taken even as government further eats away at civil society, but this all operates according to the principle of guilty until proven innocent.

Higher prices themselves are not the problem, but reflect the problem — a shortage of supply. Higher prices will speed necessary supplies to where they are needed better than misery-inducing price controls. Government attempts to distort reality will always result in harm to those who have to live with the actual result.

Despite, or rather because of, everything government has done, shelves are still empty of goods such as hand sanitizer. Government is simply hampering efforts to get necessary goods from point A to point B out of misplaced and confused moral indignation — and no doubt to improve its reputation regardless of the actual consequences.

Micah Haber, of Chaska, is a proofreader and blogger.