Price gouging saves lives

Given the hurricanes that Houston just suffered through, and Miami is currently preparing for, the subject of “price gouging” has naturally arisen.

First of all, the phrase itself indicates more of a moral reaction to, rather than a value-free description of, what happens to prices of goods in the midst of a calamity. It sounds as if someone is manipulating prices so as to inappropriately taking advantage of people who urgently need particular goods at a dire time of need.

However, “price gouging” is the best way to allocate scarce resources under extreme circumstances. High prices encourage more supplies to come in, which will eventually being prices down. Plus with market prices acting unimpeded, people need to decide how much they actually need, so it discourages hoarding. In fact, a very strong argument can be made that allowing market prices to work actually saves lives.

To learn more about how “price gouging” is actually a necessity, please see the following resources:

1 thought on “Price gouging saves lives”

  1. I wonder how much of it is the natural human desire to have someone to blame for misfortunes. Obviously nobody’s to blame for the hurricane itself (unless one desires to go *way* down the global warming rabbit hole, but very few people want to visit that level of crazy), so people fixate on the next level down, which is, of course, the disruption of supply chains. Aha! It’s those greedy merchants taking advantage of human suffering that’s to blame!

    It’s simple enough (and valuable to boot) to point out the economic illiteracy of this position, of course. But if history is any guide, it’s not a fight we’ll ever win; the desire to have a villain to blame appears to be fundamental.

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