Why Sound Arguments Against Price Gouging Laws Fall on Deaf Ears

By Jay Richards Published on September 8, 2017

As sure as night follows day, the media start reporting on “price gouging” as soon as a hurricane comes ashore. After Harvey hit the Texas coast, the attorney general was quick to warn merchants about the state’s laws against price gouging — that is, charging too much for goods. With Irma, the stories have started days before the hurricane hits our shores. 

And as sure as day follows night, folks who grasp economics explain why laws against price gouging are stupid. Prices need to go up, even way up, during such disasters to avoid shortages.

And no one persuades anyone. Here’s why.

Why Prices Should Rise

If you know what prices do, you know why they need to go up during crises.

“Prices should rise during emergencies,” John Stossel argues. “Price changes save lives. That’s because prices aren’t just money — they are information.”

For instance, a price spike on water and gasoline in Houston signals to suppliers that people want water and gasoline more there than in, say, Sioux City. These signals draw more suppliers to hazardous and needy Houston rather than to safe and settled Sioux City.

Prices will also go up in Sioux City (as they already have everywhere), though not as much as in Houston. The result? More gas and water go to the places they’re most needed. (See this great video explanation.)

Higher prices also coax consumers to conserve. High prices on bottled water and gasoline discourage the first customers from hoarding. That leaves more for others.

In the same way, if the prices on hotel rooms triple along evacuation routes, big families will opt to sleep on pull out couches and roll-away beds rather than rent a block of rooms. That leaves more space for other people. If the prices didn’t go up, the first people who book rooms will get them, and leave fewer rooms for others.

Politicians can’t guess the market prices for everything ahead of time. So there’s no way for them to know what amounts to “gouging.” Florida law defines gouging as a price that “grossly exceeds the average price during the previous thirty days.” Which means, of course, that the attorney general looks at allegations on a “case-by-case basis.” That, by definition, is bad law. 

In short, if politicians set ad hoc price ceilings on water, gas, hotels, etc. during disasters, they could create a shortage in the area most in need of these things. Shortages are bad anytime. But they can be a matter life and death during an emergency.

It doesn’t seem to occur to anyone that exploiting people in an emergency and laws against price gouging are both wrong.

This is Econ 101. Supply drops. Demand spikes. Prices go up, while competition keeps them from going too high. In a market, prices reveal underlying supply and demand. Government price controls, in effect, scramble price signals. They force prices to lie.

Conclusion: If you want needy people in Houston and Florida to get what they need, let prices do what they need to do.

What are You, a Robot?

The argument is simple. It’s also the sort of Mr. Spock logic that drives a lot of people crazy.

Michael Miltzik spoke for many when he wrote in the LA Times, “Memo to economists defending price gouging in a disaster: It’s still wrong, morally and economically.” It’s clear that Miltzik doesn’t get the arguments he’s attacking. But he’s right on a narrow point: Morally, it’s wrong to exploit people in an emergency.

That moral truth makes it hard for most folks to process the arguments against price-gouging laws. This may be why these arguments go nowhere.

To make matters worse, some of the econs who criticize anti-price gouging laws treat “price gouging” as a good thing. That’s what Tim Worstall did at Forbes last week, though his piece has since disappeared. I get the argument. But here’s what that sounds like to most readers: “It’s good to exploit people in an emergency!”

But it’s one thing to say prices should be allowed to signal real supply and demand. It’s another to endorse taking advantage of people in dire straits. If they want to persuade people rather than just refute bad arguments, econs should work harder at answering people’s moral concerns. 

It doesn’t seem to occur to anyone that exploiting people in an emergency and laws against price gouging are both wrong.

Economic truths aren’t suspended during an emergency, but they’re only part of the picture.

Secretary of Energy Rick Perry may have been thinking this when he reportedly said last week “that even though gas prices will increase because of supply issues, retailers should be wary of inflating prices unfairly.” In other words, basic supply and demand will cause prices to go up at the local Exxon station. But some merchants might raise prices much higher just because customers will be desperate.

Yes, the overall effects of their actions may be good — more water, gas and hotel space for more people. But that doesn’t mean, as a private moral matter, that literally taking advantage of people is right. God knows and cares about what we do and why we do it. At the same time, just because it’s wrong to take advantage of people doesn’t mean laws against price gouging will help people.

What We Do in Emergencies

Economic truths aren’t suspended during an emergency, but they’re only part of the picture. FEMA kicks into high gear. The Coast Guard moves in. Emergency shelters open. In Texas, the whole national guard was called up. The president and vice president have gone to the Lone Star State to comfort victims. Police and firefighters have gone above and beyond the call of duty. Firefighters from other parts of the country have rushed into the danger zone.

That’s just government actions. Celebrities have also donated money to aid groups. Churches have become rescue shelters. Neighbors have rescued neighbors. Monster truck drivers have helped the National Guard. And the “Cajun Navy” has reminded us of the many decent Americans we don’t otherwise see on the evening news. Most of this has little to do with normal market exchange. People are focused on survival, not trade. That context of charity and help matters.


Exploiting People is Bad Business

 That’s why, for a business with long-term plans, even appearing to exploit customers in an emergency is double dog dumb. A smart company will do just the opposite.

How many millions of us have seen the story of the Spencers, an elderly Houston couple whose home started to fill with water? The husband, J.C. Spencer, called his favorite Chick-Fil-A for help. “I ordered two grilled chicken burritos with extra egg and a boat,” he later explained. The manager at Chick-fil-A sent her husband with a boat to rescue the Spencers. We know the story because it ended up on ABC’s Good Morning America and the whole internet.

You can’t buy that kind of publicity.

Contrast that the Best Buy in Cypress, Texas. Someone posted a picture from the store of a double-pack of bottled water, with a price tag of $42.96. I doubt the price was illegal. (It was about twice the price for a similar pack that Walmart had listed on its website.) And there was probably free tap water in the back of the store. Still, the bad publicity forced Best Buy to apologize.

I wouldn’t want to be that Best Buy manager.

You see, the market, especially in the age of social media, and without silly laws against price gouging, has a way of sorting these things out.

Print Friendly
Comments ()
The Stream encourages comments, whether in agreement with the article or not. However, comments that violate our commenting rules or terms of use will be removed. Any commenter who repeatedly violates these rules and terms of use will be blocked from commenting. Comments on The Stream are hosted by Disqus, with logins available through Disqus, Facebook, Twitter or G+ accounts. You must log in to comment. Please flag any comments you see breaking the rules. More detail is available here.
  • Paul

    price gouging laws are simply rebranded govt price fixing. The National Recovery Administration of the 1930’s showed how well the govt can decide all these things…. NOT!

    • random

      Yeah the American economy collapsed and the empire failed after being crushed by Japan in WWII, oh wait the opposite happened.

      • Paul

        Um let’s see, the National Recovery Administration was tanked by SCOTUS in 1935, WW2 began in 1939… and your point is?

  • Mitch Reed

    Jay Richards.
    I just want to say that this was a well reasoned article. First you gave a cogent argument for the necessity of prices rising in an emergency. Then you highlighted the view from the other side and shared why it was persuasive. Then you clarified terms to show both views have validity. Finally you resolved the apparent paradox by showing that though it may be necessary to have prices rise in an emergency, it is in a companies long term interest to prioritize people over profits. Thus making laws unnecessary. Thank you. I had previously agreed with your position but had reservations. This article helped me resolve it in my thinking.

  • ncsugrant

    The laws against price gouging are merely self-aggrandizing politicians on parade. They portray themselves as the only good guys around, and without them, we would all be victimized.
    I have experience quite a few prolonged disruptions, and I know well that threatening retailers is a sure way to experience shortages of needed items. Who has an incentive to pay for an empty trailer to go 5 states away to bring back much needed supplies, only to be ridiculed as profiteers by the media and politicians? It looks like Florida will get to learn this again soon, with a prolonged shortage of chainsaws, generators, plywood, etc.

    • Jay W. Richards

      Yeah, that’s their main function.

  • David

    This argument has no basis in even logic. It just means you are evil and greedy.

    Price gouging is not necessary. Rationing is necessary in times of crisis, but because you are so tainted by greed, you cannot think of any other way to ration things than by giving them only to the rich.

    • ncsugrant

      You have missed the entire point, friend. Nobody thinks “price gouging” is good, and who said anything about “giving them only to the rich”? Rationing means there is some authority figure somewhere who allocates goods and services. A cursory review of history demonstrates that no government has ever managed to come close to the efficiency of distribution provided by a free market. Those who seek to control markets are interested in power, and those who support them are ignorant of history.
      Do you really think allowing gas prices to temporarily rise 20-30% in exchange for not running out of gas somehow disproportionately helps the wealthy? Talk about no basis in logic!

      • David

        Okay, I know your brain is tiny, but let me try and explain this to you.

        If you make necessary goods that people need to survive cost more money, then people with more money, can still buy more than they need. People who don’t have much money, won’t have anything. Do you understand this point, where people live or die based on how much money they have?

        The free market is good only at ensuring the rich get richer and the poor die.

        • Andrew Mason

          Probably best to refrain from insulting others, especially if they might be your betters.

          I’m opposed to price gouging, but the logic of this article makes sense. If there are a finite amount of a particular resource, and resupply is not an option, likely to be delayed, or likely to occur at a reduced rate, then some form of limiting is required, unless you’re recommending a business sell all their stock then close their doors until restocked – however long that may be. That option simply helps those prepared to rush in and clean the shelves, even if that means climbing over the bodies of their peers.

          Should I take it from your comment that the free market favours the rich and kills the poor that you prefer Stalinism?

          • David

            If you were my better, you wouldn’t be arguing in favor of abusing tragedies to Rob the poor.

            The article is poor because it makes a bad assumption. It assumes that, in times of tragedy, price gouging is the only way to prevent wastage. In reality, that is horrific and wrong. See, the articles failure is assuming price gouging is the only form of rationing.

            Here’s a solution that works – keep prices the same, but limit it to one per person. 1 case of bottled water. 1 packet of bread. So on, so forth. A man needs to feed his family? Let him show proof of his family, and he may buy all he needs, but not all he wants. The rich are not the only ones who survive – instead, all may.

            I will give you the benefit of the doubt, and assume you are not heartless. If you do have a heart, you must be able to see why giving to survivors by their needs is so much more Christian.

            I prefer humanitarian capitalism, where human life is not treated as less important than profit. And “Stalinism” is not a thing.

          • Andrew Mason

            Oh I never said I was your better, though given your limited ability to comprehend English I suppose it’s possible. And I never argued in favour of abusing tragedies.

            If price gouging isn’t the optimal method you’re more than welcome to advance a counterargument. Perhaps you’ll even convince Jay Richards if your logic is good enough. Do note I said I was opposed to price gouging, but it is obviously a method. My suggestion was diverting price gouged profits to charity.

            That crossed my mind, and I pretty much automatically discounted it. Without some sort of tracking or rationing system it’s open to abuse. Pick up your groceries – go to counter 1 pay and deposit in vehicle. Return to store, collect groceries – go to counter 2, pay, and deposit in vehicle … And shops using self service are even more incapable of restricting sales. As for proof of family, what proof? How do you prove the size of your family? What form of ID or documentation would be universal, acceptable, and not prone to abuse?

            Charity is a different matter to folk trying to run a business. Charity helps people for free, business makes money.

            I’m not even sure what humanitarian capitalism is – don’t recall hearing the term before. Yes human life should be more important than profit, however a blank cheque approach to that is dangerous. If a company spends millions (even billions) on a product, should a person that cannot afford it be denied access to it? Companies need to make a profit to survive. As for Stalinism not being a thing, might I suggest you do a little reading about Marx and 20th century Russia!

          • David

            Just like a conservative, all your problems are completely insane and delusional, with nothing approaching reality.

            For your multiple counters argument, not only does this rely on nobody noticing this man going in and out of this store multiple times, it also relies on people not noticing a car full of supplies in the midst of a hurricane. As for your example about self checkouts, I notice prices would be irrelevant since people would just take it. So you presented a delusional hypothetical that your “solution” wouldn’t solve. Very Republican.

            As for proof of having a family, how about pictures of your family. That thing everyone who has a family carries in their wallet? And because I know defective Republican thought, and know what you will claim, no-one is going to, in the middle of a hurricane, edit a photo of themselves to insert fake people, just to get more water.

          • Andrew Mason

            More gibberish and insults.

            Shops are busy places, and I’d expect staff tend to have things on their minds when little things like inclement weather looms. You probably have a point about shop lifting being simpler with self checkouts. Not something I’d considered. Actually it’s 2 very ordinary possibilities.

            Who carries pictures of their family around with them? I’ve never seen anyone with wallet photos. Yes I’ve heard of them, but I’ve never seen them. It also doesn’t prove anything – it’s not ID. You’d need to restrict it to something like a passport or a birth certificate – documents everyone has. Since no single form of ID would probably work for everyone you’d need a range of options. Actually I hadn’t thought of editing a photo, at least not in the middle of a hurricane, but the problem is when I take photos I’m not in them so how are my photos going to be any different to printing off a random photo from the internet? Back to the drawing board I think.

          • David

            You don’t carry photos of your loved ones? Is there something wrong with you? Are you one of those people who don’t feel love for others?

            I’m not even talking about cashier, I’m talking about survivor. People would notice others abusing the system. So No, your “problems” still aren’t real.

          • Andrew Mason

            Why would I want to carry photos? I prefer to carry as little as possible. Interesting imposition of cultures though – the assumption that folk need to carry pictures of their family around with them. As said, I don’t know anyone who has pictures in their wallets.

            Survivors happen after the event. Doesn’t in the middle of a hurricane include before? And no I doubt post event survivors are going to notice someone abusing the system if done right. They’re more likely to be busy getting on with surviving.

          • David

            That’s not an imposition of culture, that’s just a natural human desire to see the people we love. Wallets are designed around the fact that people like to carry pictures of the people they love. No joke, that sounds like its a legitimate problem. You sound very unwell.

            So your idea relies on these people sneakily enacting this master plan to get more bread and water than they can use, by using practised, subversive tricks. So, let me get this straight. In your mind, this person was practising this routine long before the Hurricane hit. THey went through all this preparation, running through the perfect way to not arouse suspicion, all so they could buy more water and bread at market prices. THey didn’t stock up before the Hurricane hit, oh no, they practised so that they could get more when the Hurricane hit. Do you understand how completely stupid this hypothetical sounds?

          • Andrew Mason

            I see folk when I physically see them, or vid chat with them. Alzheimer’s isn’t a problem for me, so photos aren’t critical. And no wallets are designed for cash and cards not photos, that’s what albums are for.

            Who said anything about more water and bread than they can use? You said a loaf and a case of water. Problem is a loaf is enough for one person for one day, unless supplemented with other food. I for one wouldn’t want to be going back to the shop every day – too much of a hassle. As for practicing the routine pre-hurricane, how stupid do you think people are? As long as they work out the methodology they’ll get away with it. Practicing it won’t help, especially since the mindframe of staff will be different. Note too, assuming you want an alternative, they could just go to a different store and get items there. Sure it may be greedy, but it’d work. And why assume bread and water will be the only items on sale? Sure people should stock up pre-hurricane, but some folk are busy, some overlook things, and some will find out their stored items have expired and they aren’t as prepared as they thought. You may not have like the original position in the argument, but you don’t seem to like holes being blown through your idea either. Fussy sort of chap really aren’t you. 🙂

          • Jump

            David, your reply ignores human behavior. See my comment about your proposal, which I made to Andrew. Incidentally, I lived in a communist country for years. Your suggestions are on a par with the kind of stuff they would try. But those sorts of state mandated distributions of goods just incentivized corruption and inefficiency, and left people no better off than they were before. See my comment to Andrew.

          • Micha_Elyi

            You want to buy any wallet you like, cheap, during a hurricane.

            Got it.

          • Jump

            David’s scenario ignores human behavior. He thinks a car full of hoarded supplies will be conspicuous and therefore disincentivized?By what?—the police will now have one more thing to watch for? Great. Spreads those resources even thinner. (And I wonder if he advocates for police enforced anti-hoarding measures under the current regime. Genius.) And family photos as proof? LOL. “Here’s my family of 12 from Google Images. Oh, don’t like it Mr. Cashier? Here’s an extra $20 just to let it slide this one time.” That’s how this will go down.

          • Micha_Elyi

            “If price gouging isn’t the optimal method…”–Andrew Mason

            Price gouging isn’t optimal. Permitting price gouging is the worst possible system except, as Winston Churchill said in a similar case, for all the others.

            Poor David suffers under many delusions, one of which is the belief that if price gouging (however defined) isn’t banned, it will be universal. Weird.

        • ncsugrant

          Wow! I am glad I was busy last night.
          Personal attacks and name calling are hallmarks of those without facts to support their position.
          Just for the record, people who live in free, capitalist countries do not die for lack of food, clothing, or shelter. You see, the prosperity of their economies, along with the generosity of their neighbors has always provided.
          State controlled distribution of goods and services, on the other hand, has left a trail of death and despair in EVERY SINGLE COUNTRY where it has been imposed. Of course, the architects of such schemes are never the victims.
          Before spewing your next round of pejoratives, maybe you could find a fact based book of history. Then you might see that the empty promises of socialism/communism are just that, empty.

          • David

            “Just for the record, people who live in free, capitalist countries do not die for lack of food, clothing, or shelter.”

            Lie number 1 and 2, people absolutely die from those in a capitalist society – 4000 Americans die from starvation a year. 1300 die from exposure to the cold. You are lying, because you refuse to acknowledge the truth.

            “You see, the prosperity of their economies, along with the generosity of their neighbors has always provided. ” Lie number 3, and you are out – the prosperity of these economies is not spread to others, it’s hoarded by the top 1%.

            See, unlike your alternative facts, I have REAL facts. And REAL facts, as always, never support Republicans.

          • ncsugrant

            Friend, you are delusional.
            I see your true colors, and you are just a useful tool of your team.

          • David

            Just like all conservatives, running away scared when you know you’ve lost an argument.

          • ncsugrant

            David, you are just a loudmouth who wants to call names. NOBODY is running from you, and I will let you know if you ever win an argument.
            Your enduring belief in Marxist economic theory would be sort of amusing, if not for the tens of millions who died so the masters could live as kings.

          • David

            As opposed to the tens of millions who died so the top 1% could live as kings? Are you using the conservative lie where you refuse to count people who die because of the cruelty of the free market?

          • ncsugrant

            Show me these people David!
            As I said, you are delusional. There is simply no contest between the standards of living in the free world versus Marxism.
            Plenty of people still know the truth. We watched it up close.
            I will not stand by while you and others try to gloss over the pure evil that is communism.
            Pointing to the small percentage of poor people in capitalist countries, while ignoring the literally countless dead in communist countries is the lie in this discussion.

          • David

            Google graves of slaves, and people who died because of a lack of universal healthcare, for several of the millions dead due to free market capitalism. Go on.

            Trying to claim that the millions who live below the poverty level is a tiny amount is the lie here.

          • ncsugrant

            So nobody dies if we only give over everything to government? Slavery was unique to capitalism?
            David, you and I will die also, and it will not be the fault of the economic system in which we reside.
            However, there are tens of millions dead because they were consumed by the machinery created for the benefit of the few. FYI, “universal healthcare” is a relatively new deception. Most of the people who succumbed to Marxism never heard the term.
            You seem to just want to peddle a revisionist history. No sale here. Your failed system is as dead as Fidel Castro and Marx.
            It would be refreshing indeed to see people like yourself stop hating the country and system that gives you the luxury of being prosperous and wealthy despite your profound, outspoken ignorance.

          • David

            And of course, the conservative double standard. Double standards are the only kind of standards any of you have.

            So all deaths under any system apart from rape and pillaging free market capitalism are all the systems fault. But deaths under this unregulated capitalism, you can’t possibly think those are capitalism fault.

          • ncsugrant

            David, not sure what else to say to you pal. You just don’t want to examine history.
            Here is my last attempt to wake you up.
            Tell me how many people have been imprisoned for speaking out against capitalism in capitalist nations? The historical records, maintained by the statists themselves, show the millions upon millions who needed to be “re-educated”. Sadly, most of them are no longer with us.
            See, Marxism tends to have few detractors from within. Just a funny coincidence I guess.
            I will take my rest now, so I can get up and be prosperous again tomorrow, What a country!
            No doubt significant portions of my income will go to the benefit of those less fortunate, some of it voluntarily.

          • David

            And I know conservatives rage and thick, thick skulls mean they cannot admit when they lose an argument, so I’ll keep track of it myself.

          • Micha_Elyi

            David, you labor under the erroneous belief that the existence of market imperfections implies the existence of government perfection. Let me disabuse you of the notion that government offices are populated by A Better Class of People who are endowed by their Creator with Perfect Knowledge.

            When you find an example of free people acting under the system of natural liberty (what Adam Smith called his discovery, he didn’t use the term ‘capitalism’) who create a catastrophe equal to the government-created Holomodor then you might have an argument that your faith in government diktat is not misplaced. (Be prepared to provide evidence to support your claim. Links to reputable sources, please.)

          • David

            The opioid epidemic.

            Do you need me to walk you through why drug companies pushing their products on vulnerable people to get them addicted to prescription painkillers is a problem Inherent in capitalism? Because we could ask a 5 year old to explain it if you need it.

    • Micha_Elyi

      “Greed”, dear David, is the desire for the unearned. People who are prepared have earned their price. People who are unprepared but covet their neighbor’s goods (one example of such covetousness, desiring to get goods in emergencies for non-emergency prices) are your “evil and greedy”.

  • Andrew Mason

    Perhaps if price gouging as a resource conservation measure were accompanied by charitable giving the bad PR would be balanced out?

    • Jump

      What do you mean, exactly? There is charitable giving.

    • Jump

      Oh, I now see what you mean from a later post. If it’s forced giving, is it really charitable giving? More than that, though, the prospect of not being able to charge what you want in certain circumstances will disincentivize people, in the long run and in the aggregate, from supplying a given good: I get into business selling a good or service knowing that there is a risk I will sometimes take a bath but in hopes that I will be able to make up for that loss at other times. If I know that the government will prohibit me from making up my losses over the long term, though I will—all things being equal—want to get out of the business or just close up shop early and not make my good or service available at all. Still more, consider the risk I take as a business owner in a disaster, not knowing when I will be resupplied, not knowing how long I will be closed once I’m out of stock, not knowing the repairs I’ll need, knowing I’ll still have to pay my bills on time, not knowing when normal cash flow will resume. So many risks that that raised price helps mitigate.

  • Billy Chickens

    Well, whatever. Hurricane Irma is approaching here in 4 days. Already there is NO BREAD and NO WATER to be found on shelves anywhere and gas stations have long lines of cars. Ran into an employee of Lowe’s who said that they had several pallets towering with packs of water this morning. They open at 6am and in less than an hour the water was gone. Why? Because some people went there and loaded up the entire back of their pickup trucks with as much water as their trucks would hold. Maybe they have a store somewhere, but maybe not. Maybe they were just greedy. There should have been rationing. In order for us to have water we went to the gas station nearby and bought individual bottles from their refrigerator section where the sodas are. Expensive but at least we have water to last a few days.

    • Jay W. Richards

      This is precisely what prices do. When they’re allowed to fluctuate, they draw goods to the places they’re most valued, and they help ration goods and services. If a cap is put on prices, the first people that show up tend to hoard, which creates unnecessary shortages.

      • Billy Chickens

        Packs of water (24 bottles to a pack) miraculously appeared today at the Winn Dixie where we went for last minute supplies (no D batteries left and still no bread). Store clerks helped people put the packs in their carts and I noticed no one took more than 2 packs (we got one). Cost of each pack was $3.99. Gas lines are still very long.

        • Jump

          Right, but you’re depending on sheer luck then—and that everyone will be so generous or restrained. Can we depend on this normally? No. After all, the counterexample are the hundreds of stores that ran out of water, fuel, etc.

      • random

        That doesn’t prevent hoarding by people that can afford to do so at all.

        • Jump

          Right. You can’t guarantee what happens in any given case. There are no guarantees in life. But that’s not the purpose of prices. The function of letting prices rise is to create a—this is the key—*disincentive* for hoarding, which, in turn, *decreases the likelihood* of shelves emptying as quickly as they otherwise would.

        • TheMagician

          What would the motivation be to hoard if the prices are high? Rich people aren’t in the habit of paying $8 for a bottle of water and buying 100 bottles for…what exactly? You can’t resell them for a profit. So you buy what you need and therefore leave more for the next guy.

  • Bob Adome

    Misunderstanding comes from not teaching basic economics to Americans.

  • The Evangelical

    This all makes perfect economic sense…except it’s woefully utilitarian. Yes, we get more market signals from letting the prices go up. Yes, it helps the macro economy more in the long run. And yes, companies that do this will, eventually, go out of business.

    But here’s the problem: you are traveling, out of gas and water, walk into a hotel, but can’t afford to get a room from the price gouging. Where do you go? A church? A government facility? Many places in the South and Mid-west can go for miles without either of those in sight. Your internal clock is ticking: you can only stay awake for so long, dehydration sets in, and starvation kicks in after that. Assuming nothing else happens, you only have a few days before its over.

    In other words, yes, this makes perfect economic sense, but sometimes people die before the market corrects. And I’m happy for the market to take a few days of inefficiency to keep people.

    • Jay W. Richards

      You’re not thinking fully through the economics. That is, you’re not thinking beyond stage one. “Utilitarian” is pejorative here. It should be obvious that we don’t want laws that *make things worse.* Prices make more of these things available to more people *during the emergency* (not just later) because they lead people to do different things than we do otherwise–such as hoarding and overconsuming. You’re assuming that with price gouging laws the hotel room would magically be there when you arrive, at the price you can afford. But if the law forces hotels to keep prices below the market rate, it’s much less likely there will be any room available. Rooms are scarce goods, so people will consume more of them at lower prices. Price gouging laws literally do nothing to help all the things you’re talking about. They make all those things *worse.* Watch the video I link to above, which walks the viewer beyond the first step. This is the essence of economic reasoning:

      • The Evangelical

        To continue the example in the video, what if the woman only has $1,000 for the generator that’s normally sold at $800, she can’t afford the $1,300 even if it is there. Whether price gouging prevents hording is irrelevant if she can’t afford it at the new price–she won’t get it either way. The video assumes that the market participants can purchase the goods even at inflated prices.

        As for market corrections, unless we’re talking about commodities that can shift that quickly, most individual products don’t actually decrease in price quickly in response to the increase supply in catastrophes. However, price gouging will increase the price very quickly, and the new prices will remain sticky throughout the crisis, or decrease very slowly. So even with additional supply, she may not be able to wait until the generator goes down to $1,000 before she can afford it. Remember, like in my example, the clock is ticking and the market may be in flux longer than the person can survive.

        This is not the essence “economic reasoning” its the essence of the “efficient market hypothesis” that price changes are nearly causally related to changes in supply and demand. This is true in the medium to long run. But in the short run, peoples lives are at stake before the market can correct itself and bring the prices down. It makes for good models and works well overall, but it’s woefully inadequate public policy in the case of catastrophes.

        • Jump

          Your case considers only the short term and particular, ignoring the long term and aggregate. It is therefore woefully inadequate for forming public policy due to failing to consider all the other consequences and persons price gouging laws would affect. It’s no objection to sound economics that it doesn’t solve every problem. Only in Utopia or Heaven will we have that.

          • The Evangelical

            Public policy can ignore long term and aggregate factors in very specific situations. For life and death situations, the short term take priority. Honestly, we are talking about days, not months or years. The long term and aggregate impact would be minor. You are correct that you must choose and there is no utopia, so why not choose the short term in these situations?

          • Micha_Elyi

            “Honestly, we are talking about days…”–The Evangelical

            …then your hypothetical buyers who don’t want to pay the price the seller asks can wait a few days. Let’s be honest. So-called anti-gouging laws are attempts to use Caesar as an end-run around the Commandment forbidding coveting thy neighbor’s goods. I’m unaware of any such loophole.

          • Jump

            We shouldn’t choose the short term in these situations because that robs us of the rationale for liberty in markets, full stop.

        • Micha_Elyi

          “To continue the example in the video, what if the woman only has $1,000 for the generator that’s normally sold at $800…”–TE

          Then she can wait for conditions to return closer to normal.

          While she waits, she can pray for the strength to resist coveting her neighbor’s goods, for the wisdom to find another solution to her immediate difficulty, for God to provide, and for His will to be done.

          • The Evangelical

            Romans 13 says to absolutely obey the government. They are God’s ministers for our good, so they made price gouging illegal. Those who protest against price gouging are protesting God’s ministers. You need to repent. See? I can take scripture out of context and say sanctimonious things too!

            But seriously, reasonable expectation of sticky prices is not coveting. Also, these companies incorporate in states where they have agreed prematurely to obey the laws and not to price gouge, so they are in the wrong. If you want to do business, then you have to follow the laws even if you don’t like them.

            The wise and foolish virgins parable does not demand that we prepare for all possible scenarios in this life. It clearly is talking about the Gospel. Don’t use that to bludgeon people who don’t prepare for certain circumstances. In fact, I would say that Jesus himself discourages this in Matthew 6:25-34.

          • Micha_Elyi

            Speaking of repenting and taking Scripture out of context, hah ha, you failed to recall the context of your very own hypothetical. Your “what if” presupposed that there was nothing restricting your merchant from raising the price. Repent your errors! Then go and offend Truth no more.

            P.S. If you recalled the parable of the wise and foolish virgins, you’d remember that they wouldn’t sell their oil at any price–arguably that’sthe ultimate in price gouging.

  • random

    It totally makes sense for people that have a lot of bills to pay and things to replace to pay even more money because of price gougers, definitely.

    • Jump

      It totally makes sense that businesses who sell goods be suppressed arbitrarily at the whim of some all-knowing bureaucrat from naming their price. Totally. I bet you’re just fine when the buyer has to buy it at the price YOU think is fair. Totally. It totally makes sense that we ignore the immutable laws of economics, and with it, the line of people 200 deep at Costco trying to buy water, just so that the person at the front of the line can buy all the emergency water he wants to bathe his dog. Totally.

  • TheMagician

    You either have high prices or shortages. I prefer high prices. I have lived 6 days without gas in my car after a hurricane. I would have gladly paid $10 a gallon for gas rather than stay somewhere I didn’t want to for 6 days. An extra $60 would have been a very small price to pay.

    • Ezra MacVie

      You lived in your car? Without gas?

      • TheMagician

        No. I was stuck at a location but could not drive anywhere for six days.

  • Micha_Elyi

    Remember the parable of the wise and foolish virgins?

    • Wayne Cook

      Prepare, prepare, prepare. Even if no emergency comes, prepare.

      • Tom Tutone

        Price gouging encourages people to prepare. It encourages retailers to buy and store extra stuff. Why do through the expense of keeping extra generators on hand if you can’t recoup your cost. Gouging incentivizes everybody.

  • Ray

    Well, can’t they just call them up and say, “Hey we need more gas over here?” Wouldn’t that be faster than waiting for the price to go up?

    • Andy

      They wouldn’t know until the local prices go up.

  • deplorable_radtraveller

    Someone who retails goods buys those goods from a supplier. At that point the goods become the private property of the retailer.
    In what universe does any government entity in the US get to come in and tell people that they will go to jail for selling their property at whatever price, if at all, they want?
    If the government wants to distribute goods, then they need to have their own inventory to sell and undercut private sellers.
    They cannot force someone to sell their goods at a government set price.. this isn’t the Soviet Union.

    That said, people will remember an owner’s actions and take their business elsewhere after an event. That is the “remedy” to retailers that “gouge.”

  • Tom Tutone

    Price gouging is moral. Based on your logic, people should only sell their stuff for a reasonable profit(whatever that is). Everyobdy who sells a house and makes more money than what they paid for it(excluding inflation) is immoral. Aren’t they in a sense, gouging??? God gave us free will. Why do so many Christians think they know more than god. Freedom is the only moral position for Christians.

  • Tom Tutone

    Sad, this type of logic is why so many people suffer in the world. The only moral position is freedom.

    • Andy

      What type of logic? Richards’ logic – or the reasoning of those he’s arguing against?

  • Anthony Cieszkiewicz

    Price gouging “the invisible hand” has it place and role in the distribution of scarce resources while for the balance of the time pricing should be fair, reasonable and equitable whether from the demand or the supply side of the equation (cost, price, value). Given that “price gouging” is the norm in economics then the abuse of price gouging is “predatory pricing” “not to leave anything on the table” in either the buyer’s or the seller’s market. One may recollect it is not how many talents one has at the end of the day but what one has done with the talents that one has been given temporal stewardship (to the everlasting delight of Lazarus and the demise of the Rich Man). The freedom of the marketplace exists only to advance God’s kingdom on earth as it is in heaven.

  • Ray

    I wonder what the prices were in Bethlehem @ the first Noel.

I Wasn’t the Best Choice for a Husband
Mark Davis Pickup
More from The Stream
Connect with Us