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August 22, 2004
In defense of "price gouging"
Price gouging sounds awful, until you think about it beyond stage one, as Jeff Jacoby does in this piece on Boston.com. Excerpt:
IMAGINE a system that could instantly respond to a calamity like Hurricane Charley by mobilizing suppliers to speed urgently needed resources to the victims. Imagine that such a system could quickly attract the out-of-town manpower needed for cleanup and repairs, while seeing to it that existing supplies were neither recklessly squandered nor hoarded. Imagine that it could prompt thousands of men and women to act in the public interest, yet not force anyone to do anything against his will.Actually, there's no need to imagine. The system already exists. Economists refer to it as the law of supply and demand. Unfortunately, too many journalists and politicians call it by a more pejorative and destructive name: "price-gouging."
This is simply fatuous. Under no circumstances can price-gouging be seen as social good--even though it is what will occur in an unregulated free market under certain economic conditions. Only some one determined to fetishize the market could ever advance this argument. Ridiculous.
Furthermore, there is a famous historical example--taught at all freshman year economics courses (at leat until the late 80)--about the failure of free markets to respond adequately to a calamity: the Bengal Famine of the 19th century. Then, too, free market fetishists argued that supply and demand would "efficiently" allocate resources where they were needed most, and that any attempt to regulate prices would have "unintended," undesirable consquences.
Millions starbed to death: 4.5 million, according Amartya Sen, the Cambridge Nobel Laureate economist.
JP: You haven't made an argument, only insults (surpise!) Care to debate the merits of argument, as made by Jacoby, other than citing an outdated anecdote (almost 200 years old!) in a situation that can hardly be called a "free market"? The pricing system works as the most effiocient way to allocate resources and I can give you thousands of counter-examples of how disasterous it can be when there it state intervention in that system (take the USSR & Gosplan for just one example...)