Biden shifts blame for rising consumer prices to computer programs

President Biden has blamed everything under the sun — except his own policies — for the 20% rise in prices Americans are now paying for everything from groceries to gasoline to airline tickets to rent.  

The White House has pointed fingers at Trump, Vladimir Putin, grocery stores, service stations, greedy corporations . . . and now the latest villain is computer programs. 

Almost all of us now use Internet services like Hotels.com and Expedia to find the best deals and lowest prices on everything from jewelry to groceries to travel to used cars. 

These websites use modern artificial intelligence programs so consumers can hunt down the lowest prices — including a room at a nice hotel in Manhattan for less than $200.  

These real-time price trackers are saving consumers tens of billions of dollars a year on purchases.  

Now businesses are using the same kinds of computer algorithms to find willing buyers ready to pay the best possible prices for the goods on offer.  

But Biden-Harris regulators are crying foul.  

The administration is complaining that sellers who use computer algorithms and artificial intelligence programs to match the prices of products and services to the amount that consumers are willing to pay are guilty of a form of price gouging. 

The complaints started last month, when Biden’s Justice Department and Federal Trade Commission announced an investigation into the software algorithms landlords use to help price out their properties.  

The regulators were aiming their swords at landlords who dared raise rents more than 5% from one year to the next. Somehow, the FTC thinks that using a computer to set different rents at different times in different locations is a violation of consumer protection laws.  

But the FTC has broadened its investigation, it said last month — and is now probing any industry that uses these software algorithms to adjust prices.

The regulators charge that artificial intelligence enables companies to engage in “surveillance pricing,” attempting to predict how much an individual consumer might be willing to pay based on the consumer’s past personal buying habits.

The privacy concern surrounding such a practice is legitimate — but it isn’t at the heart of the regulators’ complaint. 

More importantly, the FTC believes that these algorithms allow companies to engage in “dynamic pricing,” which enables them to adjust prices during busy periods or when demand suddenly shifts.

This is supposedly hurting consumers. 

But let’s back up and go to a first principle in economics: sellers should be able to charge whatever they want for their products.  

After all, if you think Exxon is charging too much at the pump, you can always drive to the BP station that offers a lower price.  

Businesses have been using strategies like peak-hour pricing since the beginning of time. Has no one in Washington ever heard of “early bird” menu prices at restaurants?  

Computer algorithms are just making firms better at calibrating the right price at the right time.

By the way, these algorithms also tell companies when they should lower their prices to increase demand or to dump excess inventory.  

Ironically, the government already uses software algorithms all the time —  to help price its toll-road charges, for example, or to set prices on Amtrak trains when passenger demand is high.

Why is it a crime when private businesses do the same?

Dynamic pricing is also a strategy now routinely used by consumers every day, as our cell phones have turned bargain hunting into an art form. 

The regulators worry that in some cases — as with landlords — the programs will mean higher prices for customers when the supply is low and the demand is abnormally high.  

But peak-demand pricing can often benefit consumers.

If there’s only one seat left on an airline flight, businesses should be able to sell it to the highest bidder, ensuring that the consumer who most values that seat on the plane gets it.

Dynamic pricing with near-instantaneous price changes based on real-time supply and demand is highly economically efficient.

It essentially creates an online auctioning system for that final unsold seat on an airline or the last serving of Dover sole at a restaurant. In an auction, the price can go up — or down.  

Instant price adjustments benefit consumers and businesses. This technology increases business profits and increases total consumer welfare.

Why would Biden want to stop it?

Stephen Moore is a senior fellow at the Heritage Foundation and a co-founder of Unleash Prosperity.