A Cure Worse Than the Disease

In today's WSJ there is a good article "A Penny Not Saved" about IPLs.

Some states like Michigan have an "Item Pricing Law" (IPL) that requires each item in a retail store to have its own individual price sticker, instead of simply having a price tag on the shelf like in most states. The argument for IPLs is that they are supposed to protect consumers from pricing errors, which occur about 1% of the time. However, since the average cost of overpricing is less than one cent per item, the potential benefits of IPLs are less than one cent per item!

The IPLs also have costs, because it is expensive and time consuming to put labels on each item. And it also makes changing prices more expensive -- meaning that stores are less likely to have sales of covered items. In a competitive industry like grocery retailing, any cost increase will translate into a price increase, and we would therefore expect IPLs to lead to higher prices.

How much higher? Research by the author suggests that groceries are 10% higher in IPL stores. Food represents about 14% of the average family's budget, so IPLs reduce the real incomes of families by more than 1%.

Question: How many other laws and regulations intended to be "pro-consumer" actually make consumers much worse off? Probably a lot!