Inflation Lessons Unlearned

A new White House proposal won’t help lower Americans’ grocery bills.

by Allison Schrager
City Journal

When I was a graduate student in economics and learned about the inflation of the 1970s, I marveled at how poorly policymakers understood the problem. The price controls they enacted that decade failed miserably, leading to shortages and other market disruptions. I assumed, as a result, that we’d never hear the words “price gouging” again.

I was wrong. Last week, President Joe Biden released a plan to bring down food prices that repeats these past mistakes. The president proposes “calling on” grocery chains to lower prices, partnering with state attorneys general to “take on price gouging,” and boosting food benefits to low-income people by $2,000 annually.

It’s all bad economics. Our recent bout of inflation was caused initially by a combination of pandemic-driven supply constraints and elevated demand from federal transfer payments—not corporate greed or price gouging.

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