With Hurricanes Harvey and Irma striking the states of Texas and Florida, there were plenty of reports of price gouging, which led to widespread condemnation by politicians, law enforcement agencies and self-righteous social media users.
Why is it wrong? It isn’t. In fact, it is a public service, it saves lives and is the best emergency life raft in the marketplace.
LibertyNation.com writes:
Price gouging should not be illegal. It should be embraced and welcomed. In fact, let’s hope price gougers are scattered across Florida to, as Tom Woods would say, perform their “socially and economically responsible work.” Price gouging, as it is incorrectly referred to, is simply basic economics – a matter of supply and demand.
Here is what happens: when there is an unexpected spike in demand for a product, and the supply has yet to adjust accordingly, prices will soar. And this is a good turn of events. Why? Because if prices stayed the same, then there would not be an incentive for the entrepreneur to serve the demand or for consumers to conserve scarce items.
For instance, let’s say a group of eight people went to a hotel room to rent a suite for a couple of days during or following a horrific weather event. If prices go up, then this group is more likely to stay in one or two rooms rather than splurge on three-plus rooms, as they might, had prices remained unchanged.
In the case of water, the market forces are at play in a time of price gouging. On Wednesday, a photo of a Wal-Mart shopper with about four-dozen cases of bottled water went viral – many said in jest that she is probably the biggest proponent of anti-price-gouging laws. It is customers like these that will help make shelves bare, but this can be avoided when the price goes up.
First, if the price-tag went from $2 to $10, the consumer is far more likely to buy less and conserve their water out of necessity rather than drinking whenever they feel like it or choose to waste it by cleaning the floor or kitchen counter. Second, if there is a limited supply of water and the price is $10, the entrepreneur will take the risk to bring the water to the struggling public.
But here is a great video from John Stossel nearly a decade ago:
I live in Montana and we have a refinery right here in town. We are not affected by the storms in TX or FL. But, our fuel prices are up 40 cents per gallon. Oil prices are up a little, not enough to justify the higher prices. Corporate greed plain and simple.