With less than two months to go until election day, politicians have devoted lots of time, money and energy to proving they can offer the country something their opponents cannot.
And with many American voters saying the economy is their number one priority, politicians have focused their rhetoric on attacking inflation, decreasing the unemployment rate and, lately, what to do about price gouging.
Former President Donald Trump, the Republican presidential candidate, has repeatedly referred to the economy as the worst in America’s history, using voters’ dissatisfaction with rising prices as a political strategy. Vice President Kamala Harris, the Democratic presidential candidate, has, in turn, attacked Trump’s proposed sales tax, and blamed price gouging for high prices.
But what exactly is price gouging? The answer is not simple, according to Wheaton economics professors.
Price gouging occurs when sellers take profitable advantage of a demand spike for their goods and services — usually basic necessities — and charge higher prices than what is considered fair. Instances of price gouging often happen after natural disasters or major emergencies. For example, many stores faced price gouging allegations during the COVID-19 pandemic when prices skyrocketed for products like hand sanitizer, masks and toilet paper.
Enoch Hill, associate professor of economics, said that a lot of the buzz around price gouging has to do with “rational voter theory,” the idea that voters are “going to get minimally invested instead of really understanding the depth of things,” he said.
Jeremy Cook, associate professor of economics, noted that people are often quick to latch on to ideas without fully understanding them.
“Sometimes people will look at rising prices, and they’ll call it price gouging because they believe that sellers are taking advantage and increasing prices for their own products— taking advantage of consumers at the expense of consumers,” he said.
“One thing that resonates is how you can improve my standard of living or my lifestyle. And keeping costs down is the one thing that consumers are interested in,” Cook continued. “Different politicians on all sides of the political spectrum have said, well, one way to appease consumers is to keep prices from rising.”
Politicians propose policies they claim will keep prices from rising to appeal to voters, but economists like Cook and Hill say such policies may not make sense economically.
“Learning a basic appreciation for how markets work would make society a lot better of a place — we would probably get better policy proposals because politicians have to respond to the level of education of the voting public,” Hill said.
Many voters favor governmental regulation of inflation, for example, though most economists agree that the proposed solution to rising prices, where governments set a limit for the price of goods, is generally an imprudent economic policy. This is because there is a lack of what economists refer to as “price signaling,” where prices no longer communicate supply and demand.
“If you keep prices low artificially, it’s just hiding the problem. It doesn’t create more food. It doesn’t incentivize grocery stores to stock more food,” Cook said. “When you limit price, it’s not changing the underlying reality of scarcity. It’s just muting the signal.”
Caleb Inman, a sophomore in the Aequitas politics, philosophy and economics cohort, is concerned that in a competitive market, price ceilings would squash innovation.
“There’s always trade-offs; we might be able to get cheaper drugs with price ceilings, but we’re also going to have less motivation for companies to innovate,” he said.
“You have to somehow motivate people to do these things of their own accord,” Hill said. “And while people can be motivated, and we desire that people are motivated through charitable activities, one of the more consistently motivating factors is the ability to earn a profit.”
However, Hill isn’t entirely opposed to regulating prices. In circumstances where large corporations hold monopolies that genuinely do set prices far higher than they should, he feels more comfortable having the government intervene.
“If there does end up being market power or some type of collusion that is able to raise prices through a very large seller or through the collusion of very large sellers, I’d be in favor of the regulation of that,” he said.
As Christian economists, Hill and Cook are concerned about the impact of high prices on low income families and individuals.
Inman says he is particularly optimistic about governments and churches working together to care for the poor. “One policy I’m pretty sympathetic to is child tax credits, where the government provides maybe a couple hundred dollars for a certain family group under a certain income,” he said.
Inman’s optimism stems from his convictions regarding Christian responsibilities. Although he has specific thoughts on how the government may be an aid to those economic aims, he believes that the field is descriptive, not prescriptive.
“I think as Christians, we definitely have a responsibility to care for the poor, but I think where the government can help out is with some of these bigger programs where it might be difficult for the church to exercise that,” he said. “I don’t think politics and economics are good at telling us how to live, they’re good at giving us data on how certain ideas impact people.”
