If I were President, or Governor, or the Mayor of Any Town USA, I would call on grocery stores and other retail outlets to start price gouging. That’s right I said it!
If I were a rebel and a runner, and I got to run the big machine, I would allow price gouging for any and all items in high demand but currently in short supply due to people compulsively hoarding and/or panic buying.
Fearing increases in the prices of toilet paper, hand sanitizer, cleaning supplies and face masks, as a result of the corona-virus, officials in almost every US state, including Ventura County, have now declared restrictions on “price gouging.” But price gouging, despite its bad reputation, is the right way to ensure there’s enough of everything to go around in an emergency, whether the emergency be a natural disaster, or a pandemic as is the case right now.
And when prices are kept artificially low by government mandate, consumer demand for critical supplies (toilet paper, hand sanitizer, cleaning supplies, and face masks) outstrip the available supply resulting in shortages and eventually to rationing. But Price gouging is preferable to rationing.
Rationing is arbitrary because it assumes every consumer has an equal need for whatever item is being rationed. For example, a family of six shouldn’t be limited to the same amount of something as a family of three, or a single individual who lives alone.
When rationing occurs, one mans abundance, is another’s scarcity.
The only ethical, indeed, the only proper way to allocate scarce or limited resources is for the law of supply and demand to establish the prices for those items.
If our well-meaning local elected officials want to use their assumed powers for constructive good instead of benevolent mischief, they should allow grocery stores and all other retailers to let all of their prices float. And yes, that sometimes means prices will rise dramatically, and sometimes they will fall just as sharply.
Eventually, and quickly, prices for a market basket of food and non-food items will arrive at an equilibrium that only market forces can establish without bias or favor.
I appreciate that much of what I am suggesting here may sound counter-intuitive and even cruel. How can price gouging ever be acceptable? I also know this position won’t make me the most popular guy in the room. But if my goal in life were to be loved, I’d sell ice cream for a living.
The invisible hand of the free-market, combined with spontaneous order, as well as the seamless integration of decentralized producers and suppliers working together with the elegant harmony of a symphony, is how capitalism makes available an abundance of nearly everything, and in nearly every corner of the country, from sea to shining sea.
It is the miracle of democratic capitalism, and free-enterprise.
I realize that the term “price gouging” is politically charged and that everybody who hears this term is instinctively opposed to it. It just sounds terrible, after all. So it must be unfair because it just seems so, well, unjust.
However, substitute the term price gouging with the phrase “charging market prices for goods that are in high demand and short supply,” and all but the most stubborn elected do-gooders will understand why price gouging is good and why making it illegal is bad.
Allowing retailers to charge market prices for goods that are in high demand and short supply, in other words, allowing them to “price gauge”, is the right thing to do. It is good. Indeed, it is ethically, and morally justifiable.
And outlawing price gouging is to place our faith and our trust in the arbitrary decision making of politicians rather than in the brutal efficiency and unbiased nature of market forces. And that is never wise, most especially in an emergency.