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Strange Value System

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Here’s a letter to a “relatively new reader” of Café Hayek:

Mr. Rolfe:

Thanks for your e-mail and for reading my and Veronique de Rugy’s op-ed [2] on responses to COVID-19.

You ask if I’m “not at least slightly angered when stores sell common goods at exorbitantly high prices.”

My answer is no; I’m not at all upset. In fact, I’m pleased because these high prices incite entrepreneurs to bring more supplies to market.

Of course I lament the underlying conditions that cause the high prices – namely, the fall in supplies of goods relative to demands for them. But to be upset at the high prices themselves – prices which accurately report current levels of scarcity – would make no more sense than to be upset at a newspaper reporter for accurately writing that my home was destroyed by fire. Although the fire is unfortunate, the accurate reporting of it is not.

Nevertheless, I agree with you that “people instinctively dislike huge price rises in a crisis.” But I don’t quite understand this reaction. If customers walk into retailer A and find his shelves full but his prices unusually high, they accuse retailer A of misconduct and regard him as devilish [3]. Yet if these same customers walk into retailer B and find her shelves bare but her prices normal, they neither accuse retailer B of misconduct nor regard her as devilish. Aren’t these reactions strange? Why are retailers maligned for the challenges visited upon their customers by high prices, but forgiven for the much-harsher challenges visited upon their customers by bare shelves?

Retailer A clearly is of much more use to society than is retailerB. Yet retailer A is vilified and perhaps even prosecuted as a criminal, while retailer B is simply regarded as being among the unfortunate victims of circumstances and held up as a role model for other retailers to mimic.

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