My emeritus Nobel-laureate colleague Vernon Smith sent to me the following e-mail in response to this earlier post in which I defend economists’ case – the ECON 101 case – against government-imposed restrictions on so-called “price gouging.” (I share Vernon’s e-mail here with his kind permission.)
Don:
We already have leveling compensation for price gouging in progressive income taxes. Profits from PG will pay higher marginal rates.
How many times, places and forms do these people think we should engage in redistribution?
Vernon
To which I, Don, reply, “Amen.”
And further, as Vernon would agree, attempted “redistribution” through prohibitions on so-called “price gouging” is especially asinine and counterproductive. Such prohibitions deny to their intended beneficiaries additional prosperity. Such prohibitions make their intended beneficiaries poorer. The reason, of course, is that price ceilings make goods and services more scarce and, hence, more difficult to actually acquire.
…..
I do not hesitate to say that any economist who supports, as a means of helping the poor and middle-class, a policy of prohibiting so-called “price gouging” does not deserve to be called an economist. This fact is so despite that “economist’s” undoubted ability to dazzle sophomores and newspaper editors with logically coherent demonstrations of how such prohibitions might, under just the right circumstances and implemented with the genius and wisdom of Zeus, increase social welfare. Any such “economist” is to economics what a “biologist” who rejects natural selection is to biology.
