Whenever a natural disaster like a hurricane approaches us, there is always a mention of the supposed evils of price gouging…and authorities encouraging citizens to report on supposed swindlers in their midst. Is such a thing a valid concern?

Besides the vagueness of such encouragement (What does “suspicion of inflated prices” mean? How does such a declaration get calculated? What is “suspicious” to anyone is a subjective matter), what such policy does is get in the way of how pricing systems work. Prices serve a function of signaling to consumers and producers how much of a product or service must be demanded or supplied respectively. Controlling such a process ultimately can create disruptions in how a particular good or service is supplied and/or consumed. Look at how store shelves become immediately bare during preparation for natural disasters as well as after (news coverage tends to show many consumers hoarding water and other products beyond what they need in a disaster…causing the goods to be quickly consumed and therefore none left for other potential buyers that need those products just as much). Price bans can also cause businesses to lose distributive possibilities…which can lead to terrible circumstances for citizens, as Venezuela unfortunately showcases (https://mises.org/blog/price-controls-are-disastrous-venezuela-and-everywhere-else; http://foreignpolicy.com/2016/06/19/venezuela-maduro-food-shortages-price-controls-political-unrest/).

Indeed there are con artists out there, but such people can be dealt with in other ways besides blanket bans that tend to harm many at the behest of a few.

Extra:

http://porcupine-musings.org/2016/09/29/in-defense-of-the-gouger/

Another related aspect of this topic – http://www.usnews.com/opinion/articles/2016-10-04/why-congress-shouldnt-curb-ticket-scalping-after-hamilton-prices-soar

Advertisements