How to Help Consumers

The good news is that economics gives us some tried and true ways of making consumers better off. They mainly have to do with allowing competition and allowing increased supplies. Trump did some of that while president. Harris as vice president showed no signs of moves in that direction. Yet many of the policies that both propose would do the opposite.

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One method that appears to drive down consumer costs but actually raises them is price controls. When the government keeps the price below what the free market price would be, it creates a shortage. That causes people to waste valuable time in line trying to get the goods that are in short supply. When the price controls on oil and gasoline in 1979 kept the price of gasoline at 80 cents a gallon, energy economists at the newly created Department of Energy estimated that ending the controls would cause the price to be about $1.00 per gallon. At the time, I estimated, using the average worker’s wage and the average time spent in line, that the time cost of getting gasoline was about 40 cents a gallon. The real cost to consumers, therefore, was about $1.20 per gallon, which was 20 cents above the free market price.

 

The quotes above are from David R. Henderson, “How to Lower Costs for Consumers,” Defining Ideas, October 4, 2024.

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