I posted on the FTC Report findings earlier. In sum, the FTC was able to identify only isolated and sporadic incidences of pricing behavior which were not explained by changes in supply and demand conditions at the local, regional, and national level. In addition, the FTC investigation did not reveal any antitrust violations. The reactions to the FTC’s findings exhibit the expected variance from political pandering, to accusations that the FTC “whitewashed” its report, to boredom from economists (to whom terms like “price gouging” and “unconscionable prices” are foreign). Here are a few examples of what I was able to find in print:
- “So we’re likelier to see Elvis than gouging on gasoline? That’s good news for everybody, isn’t it? Maybe we’ll keep an eye out, though.” Larry Neal, spokesperson for House Energy and Commerce Committee Chairman Joe Barton (Houston Chronicle).
- â€œThe Bush administration is uniquely handicapped when it comes to defending the public from price gouging because it doesnâ€™t want to embarrass its friends in Big Oil. This administrationâ€™s high-prices-are-good-for-you energy policy depends on leaving Big Oil alone to charge whatever Big Oil has decided to charge.â€? Rep. Edward Markey (D-Malden) (Boston Herald)
- “Our evidence and common sense suggest a vastly different picture of unconscionable profiteering by Big Oil. The FTC has barely found the tip of the iceberg,” Connecticut’s AG Richard Blumenthal (Washington Post).
- “Asking the FTC to determine when firms have exercised market power is not likely to yield anything very definitive, and this study hasn’t. It’s not that they’ve concluded with certainty that firms have not exercised market power, only that that is no evidence of it. It is hard to distinguish in this industry between real scarcity and artificial scarcity created by the firms.” Severin Borenstein (Berkeley Economics) (Washington Post).
- Barbara Boxer said the findings about the refinery “fly in the face of reality,” and that “[t]his report proves that this administration is owned and operated by big oil.” (SF Chronicle).
- Greg Mankiw (check out his great blog) notes that neither the report findings, nor the reaction by politicians should be very surprising. See also Mankiw’s previous posts on price gouging here and here.
I find the accusations of industry capture thrown at the FTC disturbing. Apparently, these folks do not have any objections as to the merits of the report. Perhaps such objections are are forthcoming, but I’m not holding my breath. It should also be noted several states investigating post-hurricane pricing behavior also concluded that market forces were responsible for the price increases (see, e.g., n. 18 in FTC Commissioner Majoras’ testimony to the Senate which accompanied the report). The burden of proof logically must be placed on the parties arguing that “gouging,” however it is defined, is at the heart of price increases. The FTC report soundly, and strongly, rejects the notion that the burden has been satisfied to date.