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More on So-Called “Price Gouging”

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In my latest column for AIER I weigh in again on the causes of so-called “price gouging” and on the economic and ethical myopia of those who criticize merchants who charge high prices [2]. A slice:

Everyone who, like me, stays comfortably at home instead of personally bringing supplies to disaster areas effectively charges to victims of disasters prices much higher than are the prices charged by sellers who are observed on the scene to charge prices ‘gougingly’ high. Even at these ‘gougingly’ high prices, I exert no effort to bring supplies to the disaster victims. But at prices high enough, I would do so.

If, for example, someone in a disaster area offers me $10,000 for each gallon of bottled water that I bring to them, I’ll immediately drop what I’m doing, rent a large truck, stock it with bottled water, and drive through the night to cash in on this immense profit opportunity. But at the ‘gougingly’ high prices actually charged in disaster areas, I’m unwilling to exert the effort necessary to supply disaster victims with bottled water.

The actual, ‘gougingly’ high prices aren’t high enough to incite me to join in the relief effort. And of course what’s true for me is true for you and for every other person who does not personally exert any effort to bring supplies to disaster areas.

This fact means that if those persons who actually sell bottled water and other goods at ‘gougingly’ high prices deserve denunciation and perhaps even criminal punishment, then you, I, and almost everyone else – the multitudes of us who demand even higher prices to supply such goods – deserve denunciation and punishment much worse.

So-called “price gougers” actually increase the availability of needed goods and services in regions struck by natural disasters, an activity that causes prices in those regions to be lower than otherwise. In contrast, those of us who offer nothing for sale in disaster-ravaged regions – a large group that includes nearly everyone who self-righteously criticizes “price gougers” – cause, by our inaction, prices in those regions to be higher than otherwise. When we grasp this economic reality, the ethics of so-called “price-gouging” appears in a new and less harsh light.