The poseurs, preeners, pontificators, and interest-group pimps in the U.S. House of Representatives yesterday passed a bill to outlaw so-called "price-gouging" by oil companies. And the vote in favor of this foolish piece of legislation was 284-141 — meaning that lots of Republicans joined Democrats in this opportunity to prove, yet again, that both parties boast members who are either economically illiterate or morally stunted (or both).
A couple of years ago I published this short essay "On Price Gouging" (using the example of bottled water rather than gasoline — but the same economic principles apply in both cases); here’s an excerpt:
Of course, merchants can voluntarily keep their prices below market levels. But to do so would be not only harmful but also unfair! If a grocer refuses to raise the price he charges for bottled water up to the market level, he will find his store besieged by consumers. Only consumers near the front of the line will be lucky enough to get the water; those closer to the rear will go home empty-handed. Is queuing a fair means of deciding who gets the water?
Also, by not raising the price, the grocer will mute the price signal sent to the global market that bottled water is especially needed in this locale. Muting this signal will reduce how much or the speed with which additional, much-needed supplies of bottled water are shipped from where they are valued less to the disaster area where they are desired more.