What a catchy term. Kind of like, windfall profits, or savings glut. All are meant to steer your perception of a concept before you even know what it means. Does anyone reading NOT want windfall profits? Give me a break.
Price gouging is a contemptuous expression for when sellers raise prices of goods or services in response to an event set of circumstances. Price gouging, we’re told is unethical and is unfair, compared to normal prices.
After or during a disaster, demand for certain items like – gas, bottled water, batteries – goes through the roof, while supply remains finite. Therefore, the price at which the market clears where demand meets demand can rise significantly.
Allowing prices to fluctuate based on supply and demand actually serves consumers better. Here’s why:
-Communicates need: Higher prices act as a loudspeaker to other sellers in the area that there is demand for more products. High prices incentive businesses to bring more of X product to offer for sale, and indicate to charitable organizations, which products are needed as donations.
If prices are not allowed to rise, sellers outside the affected area will not bother to drive out of their way to bring sorely needed products to another market. It also deceives consumers that there is plenty of X to go around. At prices kept from increasing, instead of just buying enough gas at $20 a gallon to get out of harm’s way, consumers are incentivized to fill up completely at $2 a gallon while they can. This will dry up fuel in the affected area creating a shortage and some consumers will not get any fuel at all.
-Prepares additional goods for emergency use: Knowing in advance that prices are likely to rise, business owns are incentivized to prepare for the uptick in demand. They will order additional products and have them in stock so that they can meet customer needs and make sales. Therefore, the ability of prices to fluctuate, up in this instance, instructs sellers to organize and allocate resources to buyers that need them.
Potential sellers may be likely, if they think they can charge higher prices, to err on the side of over-stocking shelves and warehouses, in anticipation of high demand. Allowing the market to work will provide resources to areas that need it. The more sellers that are encouraged to enter the market, the more products that will be available in a time of need, whether it be: plywood, food, or sand bags.
-Encourages conservation of existing stocks of goods: Higher than normal prices tend to encourage end users to conserve existing stocks of goods or use available stocks more efficiently. High prices are not necessarily good by themselves, but they are a valuable communicator of a lack of demanded goods. In which case, the high price of say – water, will instruct consumers to ration use themselves for the time being, and not use it on less useful jobs like washing the car.
When allowed to work, market prices communicate important information to buyers and sellers in the market. Price controls and limits in how high prices can go, will limit the availability of goods where they are most needed. State price controls always lead to mismatches in supply and demand leading to shortages or oversupplies. Let producers and consumers talk to each other. They can solve their problems cooperatively, without government intervention.
What Is Anarchy? It’s Liberty, Unchained.
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