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:
- Tom Woods Show, episode 987 – “Price Gouging” is Urgently Necessary
- Robert Murphy – 3 Good Things about “Price Gouging”
- Forbes – Price-Gouging Laws – Not Hurricanes – Empty Store Shelves
- Donald J. Boudreaux – On Price Gouging
- David Henderson – Thaler on Price Gouging