The Invisible Hand The irony is that so-called "price gouging" is nothing but the market at work. When supply falls relative to demand, the price of that good or service climbs as a signal to consumers about the new reality. If there's a panic among buyers, causing demand to rise as supply falls, then the price rises still further. On the whole, those higher prices cause people to voluntarily ration their consumption, because they can't afford to use as much as they did before. The higher prices also alert businesspeople to the shortage, which signals producers to produce more, and retailers who already have more than enough supply in their region to send some of it into the shortage region, so they can earn higher profits than they could at home by helping to relieve the shortage elsewhere.
The Visible Glove But when prices are forced to remain at pre-crisis levels, it produces the perverse incentive for the first people in line to take more than they would if the prices were higher, leaving less for the next people. Equally perversely, such measures also eliminate the incentive for businesses from outside the crisis area with surplus supplies to come in to alleviate the shortage, because there are no extra profits to be earned for doing so. We're seeing exactly this scenario play out now in the southeast. There could be plenty of gasoline available for $5, $7, $10, or whatever price per gallon would create equilibrium between present supply and demand. If that natural market process were allowed to occur, consumers could choose to do without gas for a while if they felt the price wasn't worth it to them - or they could choose to still buy all they want - if they're willing to pay the higher prices. Instead, the government has kept prices at unrealistic, pre-crisis levels, and the result is that consumers are forced to do without gas because there's none to buy at the artificially low prices. Further, price controls are also an affront to property rights, which are the foundation of civilization. Any property owner has every right - if not every obligation - to attain the best possible price for his property. By what right does an unaffected third party presume to forcibly interfere? Further still, notice the inherent arbitrariness in the wording of these statutes, using terms like "unfair," "unreasonable," and "excessive." Charges on such vague terms are probably difficult to disprove, which must make it easy for governments to shake down businesses for "price gouging" fines - which is likely no small part of why such statutes were enacted in the first place. Ignorance or Malice? It's possible that some of these politicians and bureaucrats mean well, and really are so ignorant that they truly think anti-"gouging" laws really help regular people. If so, this is another argument against political power, because such people should not be able to force the consequences of their economic ignorance at gunpoint onto thousands or millions of people. Contrast this situation with the market, where people generally aren't hired for influential positions for which they're unqualified; when they are, neither they, nor their employers, can force anyone to associate with them; and companies that make a habit of hiring such people usually go bankrupt. But a cynic can't help but wonder if most of these people really are that ignorant, or if they're conscious of the fact that their policies are hurting average people, but proceed anyway for some self-interested reason. Maybe they're what Butler Shaffer describes as "people pushers," people who have totalitarian, control freak personalities they desire to indulge at the expense of others. Or maybe they're somehow gaining financially or advancing their careers by such actions. Or, again, maybe they just found another easy way to raise money, by fining businesses for invented crimes. If nothing else, anyone in government who understands the real function and value of "gouging" certainly has no incentive to admit it; if they acknowledge that the voluntary exchanges of individuals known as the market rations scarce resources as well as possible, and alleviates shortages as quickly and easily as possible, and that people don't need to be "protected" from high prices, because they can decide perfectly well on their own whether to buy something - and, if so, how much, then how do the parasites justify their jobs, salaries, and the coercive power they presume to hold over others? They can't, and therein lies a message for members of the parasitical political class regarding anti-"gouging" laws, no matter their motivation behind enacting such impediments to trade. For the well-meaning: blocking pricing information from adjusting to fluctuations in supply and demand will accomplish the opposite of what you're trying to do; rather than preventing people from being "exploited" and "gouged," you're exacerbating shortages and extending them for the longest possible period, ensuring that people can't find for any price the things they need to endure a crisis. For the sociopaths: there's a growing remnant who are wise to your "public servant" charade, and we don't appreciate having our standard of living eroded so that you can play petty dictator, enrich yourself, pay off political debts, or chase whatever other self-interested motivation you're trying to catch. Legalize Freedom Regardless of the motivations behind such laws, the only way to ensure that people can get what they need before, during, and immediately after a crisis is simple and clear: repeal them all. Legalize price gouging! http://www.lewrockwell.com/kramer/kramer20.html [Non-text portions of this message have been removed]
