A hurricane hits your town and the power
is out. Your child is diabetic
need power to keep her insulin
refrigerated. You're desperate but
but perhaps you're in luck I have an
electrical generator that I'm willing to
sell you and you have the $800 that
generators like mine typically cost
The only problem is I don't want to sell
it to you for $800 I want $1,300
now as it turns out my offer would be illegal in a majority of US states. About 34
which has statutes that prohibit price
gouging the practice it's usually
defined as raising prices on certain
kinds of goods to an unfair or
excessively high level during an
emergency. So there's really no question
about what the law would do to me if I
made an offer like this to you but even
if the law is clear the moral status of
price gouging is not. This price gouging
always amoral and whether it is or not
should it be illegal. Let's look at the
question of morality. First is asking
$1,300 for the generator morally wrong?
of course you'd rather buy it from me
for $800 but there are three reasons why
am i charging a higher price isn't
obviously wrong. First remember you don't
have to buy it from me for $1,300 that's
more than you think the generator is
worth you're free to walk on by if you
do decide to pay it's because you
believe you're getting more value out of
the generator than you do from the
$1,300 you gave up for it. In other words
you're coming away from the deal with
more than you gave up a second ask
yourself what would happen if I did
charge only a enter dollars for the
generator. Remember you aren't the only
person who needs electric power in this
situation. If the price was lower when
the generators still have been there
when you tried to buy it? Or would
someone else have snatched it up before
you ever had a chance? This leads
directly to the third point. Which is
that high prices do more than just lie
in sellers pockets, they also affect how
buyers and sellers behave. For buyers
high prices
demand and encourage conservation. They
lead buyers to ask themselves whether
they really need that generator or hotel
room or whether they can do without and. By doing so they allow at least some of
those resources to be conserved for
other people who might need them more
and therefore are willing to pay more.
And for sellers high prices encourage
people to bring more goods to where
they're needed
if generators can be bought in an area
not affected by the hurricane for eight
hundred dollars and resold later for
thirteen hundred dollars
that creates a profit incentive for
people to bring generators from where
they're less needed to where they're
more needed to get them to where they'll
do more good for people who need them
most all of this leads to a surprising
conclusion even someone who can't afford
to pay $1,300 for a generator benefits
from a system in which sellers are
allowed to charge that price that's
because the profit motive that that
system creates encourages competition
which increases supply and ultimately
drives down prices to a more affordable
level for everyone. Now it's true that
when price gouging is legal some people
won't be able to afford the higher
prices that result but ask yourself what
alternative institutions would do better. When price gouging is prohibited goods
usually go to whoever shows up first if
you care about distributive justice is
that really a better system I think
there are good reasons to doubt that
price gouging is immoral but suppose
you're not convinced suppose you think
price gouging is exploitative and wrong
should it be illegal? The answer even if
we assume that price gouging is immoral
is almost certainly that it should not
be illegal if price gouging is wrong
it's because it hurts people in
vulnerable situations but then the last
thing you want to do is hurt those
vulnerable people even more remember the
only reason price gouging occurs is
because a disaster causes demand for
certain goods to go up or supply to go
down with the result that there isn't
enough stuff to go around. Anti gouging
laws don't do anything to add
arrest this underlying shortage in fact
they make it worse by destroying
incentives for conservation and
increased supply so even if you think
that price gouging is morally wrong and
that merchants should refuse to engage
in it making it illegal doesn't make
sense it hurts the very people who need
our help most
