Here’s a letter to someone who “recently stumbled into” Café Hayek.
Mr. D__:
Displeased with my recent posts in defense of so-called “price gouging,” you write:
Economists like you prove your callousness and tin ears by white washing retailers’ greed when natural disasters hit. Ethical people don’t take advantage of buyers by charging abnormally high prices. Ethical people don’t also defend these prices.
May I ask you to put aside initial emotional reactions? May I ask that you ponder this matter more thoughtfully by considering the following questions?
Why do you think that the only greedy people in question here are retailers? What about customers? If you have only $40 to spend for a tank of propane but several other customers in the store are willing to pay $100 per tank, aren’t these other customers greedily using their spending power to deny to you the ability to buy a tank of propane for $40? Are these customers, by exercising their high willingness-to-pay, ethically indefensible?
Or suppose a price ceiling prevents propane’s price from rising above $40 per tank. You go to the store to buy a tank only to find a long line of people already queued up to buy propane. Aren’t the people waiting in line greedy for having rushed to the store ahead of you in order to increase their chances of obtaining propane and thereby decreasing your chances?
And what about the countless people who offer nothing for sale in the disaster-stricken area? Are they not greedy? For example, when did you – living in an area not affected by the natural disaster – last drop what you’re doing to gather up propane and plywood, transport these supplies to disaster-stricken areas, and sell them at ‘normal’ prices? Likely never. I, too, have never done so. Aren’t you and I, then, greedy for remaining at home and doing nothing to increase our beleaguered fellow human beings’ access to needed supplies?
You’ll respond that you’re not a merchant. But so what? Suppose you learn that in the wake of, say, a devastating hurricane in Jacksonville, if you spend a week selling propane and plywood there at unregulated “abnormally high prices” you could earn a year’s worth of income. Would you then buy these supplies, drive them to Jacksonville, and sell them at those high prices? What if you could earn in a week two years’ worth of income? Three years’ worth?
Doubtless you’ll insist that you’d never, ever do such a thing, regardless of the income you’d earn – meaning, in effect, that the prices that you charge to make these supplies available are infinite. By your reckoning, then, are you not infinitely more greedy than are the merchants who you condemn – merchants who actually make supplies available, albeit at “abnormally high prices”?
Emotions are a poor basis for crafting public policy.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
