I go over why the concept of "price gouging" is a myth. Catch behind-the-scenes posts and help choose my next video topic at:

thepholosopher

P.S. I spent this past year creating my first-ever kids book titled, “The Unschooled Adventures of Jack and Pho,” over at:

https://igg.me/at/unschooled

Families over the years have asked if I was ever going to make kids content, and I decided that it was time to do so with a topic I am SO passionate about: getting children into an environment that values individuality and self-direction.

This first title is geared toward children aged 9-to-13 but can be enjoyed by anyone wanting to see what an unschooled environment could be like.

We’re offering the book with a special bookmark and sticker pack as part of kicking off this ever-expanding universe.

Consider joining us as we inspire families to move away from the compulsory school system and, instead, toward freedom in learning.

Looking forward to you and your family joining in on the Unschooled Adventures!

~Pho

Also available on Amazon at:

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(affiliate)

Transcript:

The Myth of Price Gouging

Whenever there is an impending natural disaster, one of the first things we hear from the media is that supplies are running short due to the anticipated damage from the catastrophe.

When supplies are short and in high demand, people tend to pick up whatever they can in their abundance of caution.

However, this ends up causing shelves at the grocery store to become bare as many people all at once try to stock up.

And, with bare shelves, grocers do things in response like setting purchase limits per customer.

But why does this happen?

How is it that in a country of such great abundance, it is so difficult to get supplies for all?

The answer is simple: Price controls.

In the name of stopping “price gouging,” that is, a negative, misleading name for sellers suddenly increasing prices significantly due to an emergency, many states have made laws that preventing this sudden rise in prices.

Take for example Florida’s Statute 501.160: Rental or sale of essential commodities during a declared state of emergency; prohibition against unconscionable prices.

This law bans “gross disparities” in the prices of goods, dwellings, and storage facilities as compared to a 30-day prior average after a governor-declared state of emergency.

At first glance, someone might think “this is a good thing” because they only see the superficial aspect of the government supposedly trying to prevent desperate people from paying a lot for what they need.

But what is missing is that, with prices being fixed, the government effectively cuts off the incentive for others to come in and provide needed goods and services.

For example, if water is in short supply after a hurricane, someone from another state over might be incentivized to drive a truck loaded with bottled water, at two or three times the usual price, to profit from the high demand which, in turn, would justify their taking their time and risk to travel over to a blighted area.

When the government prevents this from happening, they deny the necessary incentives for people to come and provide value to others, value others are willing to pay for if they need it.

The government also creates supply shortages by not allowing retailers to up their prices with demand.

If prices remain the same then everyone, whether they really need an emergency item or not, tends to aggregate more things for themselves before an emergency because the price remains low.

There is no second thought about overstocking whereas, if the price were to go up 2-3 times higher, then people would be more cautious, buying only what they need.

Of course, none of this precludes voluntary charity from taking place in addition to entrepreneurs taking risks to provide value.

But you know who does prevent private charity?

The government.

In fact, the government is more often a hindrance than help.

For example, FEMA blocked private charity relief from several aid organizations to New Orleans during Hurricane Katrina in 2005, turning away doctors, supply trucks, air transport, and buses, all sent over to help people get relief.

In 2017, the Cajun Navy was told not to rescue people, an order they refused to obey, during the Hurricane Harvey flood in Texas.

And it was a good thing they refused to obey.

The Cajun Navy’s seamen rescued more than 5,000 people stuck in flood waters while state first responders struggled to get out in time.

The government is so corrupt that they will go even as far as arresting people who are trying to provide services to those in need.

Take for example Texas-based roofer Terence Duque. He was licensed in the State of Texas and decided to come to Florida after Hurricane Ivan in 2017 to help people get their homes back to livability.

His business had an A+ rating from the Better Business Bureau and he had earned the title of "preferred contractor" with Owens Corning, a national roofing supplies company.

Mr. Duque took the risk of going to a blighted area to help homeowners who were willing to pay and get their roofs fixed faster instead of having to wait for insurance payouts.

So how was he rewarded for helping customers in dire need?

With arrest.

Mr. Duque was subsequently arrested by the Charlotte County Sheriff's Office.

Not because he defrauded anyone.

Not because he did not do the work properly.

He was arrested solely because he did not have a Florida license.

So, as you can see, government is not the solution to these problems and “price gouging” is just a hyperbolic scare-tactic meant to obfuscate inescapable economic truths.

When the government gets in the way, they create shortages, they disincentivize private solutions, and they even halt charitable efforts.

The only way we can effectively and efficiently meet the needs of those in distress is a free market in both supplies and charitable help.