The price gouging stupor

Stupor Typhoon Chaba blew a bit of email from Saipan Tribune readers into my computer, and thus we confront, yet again, the whole specter of the government potentially over-ruling the free market and putting the kibosh on “price gouging” in the wake of such disasters. I’ve heard arguments about this on Saipan, and on Guam, and in Florida, the latter of which is where I saw my first hurricane when I was stationed there in 1985. I’ve changed over the years. The price gouging arguments haven’t. Stupors and typhoons seem about the same, too.

If I didn’t like you, I’d insult your intelligence and mention all the obvious things you’d expect to hear out of my eternal flapping yapper about the free market, and about how government price controls are merely the road to shortages, and about all the rest of it. But you probably know that already, since you have that keenly intuitive grasp of economics that says to you, “price controls will merely reduce the incentive for merchants to carry adequate supplies before the next Stupor Typhoon, since they will not be able to set their prices in accordance with market conditions.” See? Price controls and shortages go together like Spam and Bud Lite.

So why would otherwise rational people all over the globe turn into rabid, beady-eyed little socialists when the post-disaster price gouging issue comes up? OK, I’ll admit that most people in the world ARE beady-eyed little socialists, which is why there’s so much poverty out there. But even reasonable and worthy people see some legitimacy in the government essentially declaring martial law in commerce after a typhoon by outlawing “price gouging.”

I don’t think price “gouging” should be illegal, but I’m not saying that it is ethical, either. The specter violates most people’s notion of fair play, of a sense of community and social responsibility after disaster strikes. I think most (not all, but most) merchants would not price “gouge” at all, even if they could get away with it.

Indeed, there is a difference between profit incentive and greed. I don’t like greedy people. I won’t deal with them. Greed is a sin. But that doesn’t make profit a sin. Greed and profit are two different things.

So the issue is whether or not greed should be outlawed. Heck, I’m all for that, if we could magically legislate morality and drive all the scumbags of the world into a big prison, I’d be the first to cheer the process. But every time some strong man offers this magic with a fist-full of answers, we find that the tyranny of government controls is worse than the tyranny of mercantile greed.

Meanwhile, we have to confront the fact that most people really don’t understand how free markets work. They operate on an emotional level, and when they’re distressed after a typhoon and see, say, a $20 piece of lumber going for $40, well, how do you expect them to react? People carry millions of unwritten assumptions in their heads about how much stuff costs and, hence, how much it is “worth.” That’s only human, can you really fault everyone for that all the time? If you do fault them, then answer my follow-up question: How would you react if your doctor upped his fee to see you because he knew you were so sick you’d pay anything for some help?

Says me: Sometimes “fair is fair,” and that’s all there is to it. But outlaw price gouging? No, because when we try to make simple decrees to confront the complexities of free markets, we usually make more problems than we solve. Let merchants set their own prices, rain or shine. And let the community decide for itself who is worthy of its long term trust and good will.