Diocletian and Harris on Inflation and Price-Gouging, part 1

Kamala Harris is going to make a major economic speech on Friday. A centerpiece will be plans to blame inflation on “price-gouging” in food, medicine, housing, and more, and to go after said price gougers with all the tools of the regulatory state.

From Jim Tankersley at the NYT,

Vice President Kamala Harris will call for a federal ban on corporate price gouging on groceries … in an effort to blame big companies for persistently high costs of American consumer staples….

… a centerpiece of her plans: an aggressive rhetorical attempt to shift the blame for high inflation onto corporate America. Polls show that argument resonates strongly with voters, including independent voters who could decide the November election.

They also said that Ms. Harris would unveil plans on Friday related to housing costs and prescription drug prices.

“In her remarks Friday,” it concluded, “Vice President Harris will discuss her lifelong commitment to fighting for the middle class and tackling powerful interests by invoking her time as California’s attorney general and going after corporate greed and price gouging — and winning.”

USA today

“There’s a big difference between good business that’s responsive to markets and excessive prices that are unrelated to the costs of doing business,” the Harris campaign said in a release of the proposal.

(I like to find originals, but strangely google can’t find the press release, and none of the media covering it link to the original, not even the NYT.)

Blaming greed, price gouging, monopolists, hoarders, speculators and middlemen for inflation has a long history. Round up the usual suspects.

Diocletian

Aureus, gold coin, with Diocletian, 288 AD

In 301 AD, the roman emperor Diocletian faced a large inflation. According to Mike Duncan’s history of Rome podcast which I’ve been listening to lately, that inflation, we now know, had a simple cause: The Empire didn’t have enough tax revenue to pay soldiers. Not paying soldiers was very bad for the longevity of emperors. So, the empire regularly devalued coins, minted them, and handed them out to soldiers. You don’t need a lot of fiscal theory of the price level to guess what happened next. (Diocletian did restore the value of the gold Aureus, shown above. However, that was too large for most of the population, who had to use still depreciating coins with small amounts of silver in them.)

Diocletian can be forgiven, as, according to Duncan, romans didn’t understand the connection between coinage and inflation and he was a pretty good administrator otherwise.

Diocletian responded by blaming greed and price-gouging, and promulgating a maximum price edict throughout the empire.

I found this lovely English translation of Diocletian’s edict. I didn’t realize the edict had such a lovely preamble. Romans sure had good rhetorical skills! The translation doesn’t quite capture what I can sense of the rhetoric of the original, but it’s still pretty good. Since VP Harris is often critcized for a bit of rhetorical weakness, perhaps she might be inspired. Executive orders could use preambles like this!

On greed:

Greed raves and burns and sets no limit on itself. Without regard for the human race, it rushes to increase and augment itself not by years or months or else days, but almost by hours and very moments…

… unmastered insanity has one desire: to have no soft spot for a necessity all share. Unprincipled and licentious persons think greed has a certain sort of obligation (greed that swells and roils with rapid fires), in ripping up the fortunes of all, to lose the need rather than the will to continue. They whom the extremes of poverty have forced to perceive their most miserable condition cannot strive farther.

Greed and price-gouging:

Who has so insensible a heart or has removed himself so far from human feeling that he can fail to know - that he has not in fact felt in commercial affairs, whether done in trade or dealt with in the cities' daily exchange - to what an extent shameless pricing has spread? Neither abundance of goods nor the bounty of good years tempers this unrestrained lust for stealing! …

Some people always are eager to turn a profit even on blessings from the gods: they seize the abundance of general prosperity and strangle it. Or again they make much of a year's bad harvest and traffic by the operations of hucksters. Although they each wallow in the greatest riches, with which nations could have been satisfied, they chase after personal allowances and hunt down their chiseling percentages. On their greed, provincial citizens, the logic of our shared humanity urges us to set a limit.

Unfortunately, it took 1400 years before Adam Smith crystallized that greed has nothing to do with it, and as a later sage announced, “greed is good.” For the economy, if not your soul.

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.

Diocletian understood that prices are useful signals, and that abundance results in low prices. So, he should set a maximum not command every price:

we have taken the position, not that we must set prices of goods and services for sale - nor indeed would it be thought right, since meanwhile very many provinces rejoice in the blessing of desired low prices as if by some special condition of abundance - but that we must set a limit.

let all understand that license to exceed the same limits has been cut off in advance. As a result, in those places where a profusion of goods should noticeably abound, the benefit of low prices, which is very much the object of our care and foresight, is not hindered while greed, checked in advance, is restrained.

He understands that low prices come from abundance. High prices alas do not come from scarcity (relative to money) but “greed.”

He has a very interesting understanding of trade and how price expectations affect behavior:

Moreover, this restraint of their shared activity will be obligatory among sellers and buyers whose habit is to go to ports and visit foreign provinces. Since even they themselves know that the statutory prices for goods and services cannot be overstepped in the straits of expensiveness, at the time of sale those places and the journey and the account of the whole transaction will be calculated. In this way the justice of our decree will be conspicuous, that they who do the transporting will not sell more dearly anywhere.

He got it right that a trader, who knows he cannot buy cheaply in a place of abundance and sell dearly in a place of scarcity, will not engage in the trade. And thereby, the trader will not put upward pressure on prices in the place of abundance. Alas, Diocletian couldn’t quite put 2+2 together to understand that the trader’s supply lowers prices in places of scarcity. Even if motivated by greed.

When roman emperors want to enforce decrees, they don’t mess around with alphabet soup agencies harassing businesses in kangaroo courts. He nails the trifecta that lasted to this day: price controls on sellers, penalties on buyers too, and penalties for “hoarding.”

…we decree that if anyone should, in his boldness, strive against the form of this statute, he shall undergo a capital penalty. And let not anyone suppose that a hardship is being enacted, since the observance of restraint is present and available as a safe haven for avoiding the penalty. To the same penalty also will be subject that person who from his eagerness to buy colludes with the greed of the seller contrary to the statute. Nor will he be, exceptionally, exempt from injury of this sort who supposes that he ought to hold back necessary kinds of food or service when he has them after the regulation of this statute, since the punishment ought to be even more serious for someone who initiates a scarcity than for someone who brandishes it contrary to the statute.

(Post continues in part 2, with Diocletian’s list)