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Gouging Logic

Here’s a letter to the Los Angeles Times:

An inconsistency lies at the heart of Michael Hiltzik’s error-filled case for government prohibitions on so-called “price gouging” in the wake of natural disasters (“Memo to economists defending price-gouging in a disaster: It’s still wrong, morally and economically,” August 29).  On one hand, Hiltzik insists that disasters such as hurricane Harvey render the free market “powerless to help.”  The alleged reason is that the devastation is so great that rising prices merely fill the pockets of local merchants with unjust profits while attracting into the ravaged area no additional supplies.  But later in the same paragraph Hiltzik asserts that government will come to the victims’ rescue “by making the cost of crucial commodities irrelevant by getting them into the market at its own cost.”

If the devastated area is so thoroughly cut-off from the outside world that not even very high prices will prompt entrepreneurs to succeed in rushing additional supplies to that area, what miracle enables government to perform this task?  By arguing that government will bring additional supplies into the devastated area, Hiltzik undermines his assertion – which is key to his entire case – that higher prices do not call forth from the market increased supplies of much-needed goods.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

Other fallacies – many of them – run throughout Hiltzik’s essay.