Here’s a letter to a new correspondent:
Thanks for your e-mail.
You allege that, when I argue against government prohibition of so-called ‘price gouging,’ I “excuse greed which is not excusable even in business people.”
I disagree. If you visit my blog and search “price gouging” you’ll find that the chief reason that I (like many other economists) object to the prohibition of ‘price gouging’ is that I believe that such prohibition only makes bad situations worse for natural-disaster victims. My concern, in other words, is not for business people as such; they are a means. My concern is for residents whose lives are turned upside down by natural disasters; satisfying as many as possible of their – the victims’ – needs is the end.
But let me ask: why do you blame the high prices on business people? Would a merchant who sells, say, a small bottle of water for $20 or a tank of propane for $200 have been able to sell those goods at these unusually high prices if no consumers willingly paid these prices? Of course not. So why not blame the high prices on greedy consumers? After all, without consumers’ “greedy” desires to lay their hands on goods made unusually scarce by natural disasters, no merchant could sell any good at a price that you regard to be excessive. Put differently, in the wake of a natural disaster, consumer Smith – if he is to stand a chance of actually acquiring a good – must offer to pay an unusually high price for that good because he is competing against “greedy” consumer Jones who is also seeking to acquire that good and is willing to pay an unusually high price to get it.
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