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Yet More On the Benefits of So-Called “Price-Gouging”

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In my latest column for the Pittsburgh Tribune-Review I return again to the task of explaining the unintended ill-consequences of government prohibitions of so-called “price-gouging. [2]” A slice:

A small handful of people will agree that it’s OK for those who bring new supplies to disaster areas to charge unusually high prices. But what about merchants who, in the wake of disasters, charge unusually high prices for goods that they already had on hand and which they themselves acquired at “normal” prices? Isn’t it wrong — and shouldn’t it be unlawful — for merchants to charge more than normal mark-ups?

No.

How many people believe that someone who in 2005 bought 100 shares of Apple stock at $10 per share acts unethically by now selling that stock at today’s price of $220 per share? How many people believe that someone who purchased a home in 1980 for $65,000 is an evil “price-gouger” if that person sells the home today at its market value of $900,000?

If we don’t look askance at people selling assets such as corporate stocks and real estate at prices as high as can be fetched on the market, why do we look askance at merchants who sell goods at prices as high as can be fetched on the market? Merchants’ inventories, after all, are among merchants’ assets.

Yes, charging prices as high as can be fetched for the likes of plywood and propane might make these goods unaffordable to some people. But the same is true for charging market prices for corporate shares and houses. I, for one, simply cannot find an ethical reason for treating the sale of some assets differently from the sale of others.

And note this: By allowing merchants to charge unusually prices for their inventories, merchants are encouraged to have more inventories on hand — a happy outcome if and when natural disasters actually strike.

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