Of all the many things to say "wow" about at the moment—rapid movement of $2 trillion legislation, a rising death toll, large one-day swings in the stock market—the presence of bare shelves and rationing in American supermarkets may be low on the list, but it's nonetheless worth marking.
 A supermarket in Boston, Massachusetts, March 26, 2020. Photo: FutureOfCapitalism. |
I've only seen or imagined pictures of bare shelves like this in economics textbooks or articles illustrating the effects of communism in the Soviet Union. Yet here we are in the United States. Politicians imagine that, in the midst of the public health and economic challenge posed by the coronavirus, somehow they are helping matters by suddenly suspending the price mechanism that ordinarily allows supply to meet demand. The economic theory says that government control of prices leads to shortages and rationing. In my own state of Massachusetts, the state attorney general's website reports that "The AG's Office is watching retailers that inflate prices on products like hand sanitizer and face masks very closely" and that "On March 20, the AG's Office filed an emergency regulation expanding the definition of price gouging to include goods and services necessary for public health and safety during a declared statewide or national emergency." Sure enough, as predictably as day follows night, on March 26, the supermarket I went out to, which is usually well stocked and restocked and which is part of a reasonably good-sized regional chain, was—well, the photograph tells the story of shortages and rationing. This was not just hand sanitizer and toilet paper or cleaning supplies. Even eggs were limited to one carton per customer.
Sure, there may be other contributing factors to these shortages, but preventing prices from rising, as they otherwise naturally would, surely prevents supply from rising to meet demand. This is basic introductory microeconomics.
