The Price is Wrong: A Look into the Need for Price-Gouging Laws
I have no doubt in my mind that the laws of economics as studied by those in academia and research industries hold high validity, particularly when it comes to the way the world works. Humans are, after all, creatures of habit, so it makes sense that what we do and its consequence on the world can be quantified and objectively measured. One such concept is the idea of market clearing prices – the price at which the quantity of a product or service supplied is equal to demand, so every seller can be matched with exactly one buyer. If you think about it for a bit, it makes sense that for any set of buyer valuations, there exists a set of market-clearing prices. We see this in our everyday lives, with the price of goods rising and falling as more people want them. The Forbes article linked below puts it well in describing how in the event of a high demand and low supply of generators, the market self-regulates: “Given the opportunity to earn outsize profits, people in nearby areas might buy generators and drive them to where they are needed. Businesses would be willing to pay high freight charges to rush supply to the consumers clamoring for generators and willing to pay inflated prices.”
What this article fails to take note of, however, is the immediate consequences of just letting the market fix itself. Take, for example, the recent Hurricane Irma which was en route directly towards my hometown of Miami, FL. A storm with over 180 mph winds with surface area larger than the state of Ohio was pummeling straight towards a city full of both new and old infrastructure, as well as a majority of the people I know and love. Now I know this makes me biased, and I’m certainly not denying that. But my argument for the necessity of laws that prevent price-gouging stands in its own right in the fact that without these, many South Floridians would have had to face that storm completely unprepared. These such laws made it so that our families were able to find water, canned food, batteries, and everything else needed in an emergency situation, even if it took a couple of days and a few hours waiting in lines. And sellers like Publix, our local grocery store, maintained a constant supply of water brought in nightly truckfuls not because they could make a quick buck, but because they felt a moral responsibility to their customers to provide in a time of communal need. See, what this article fails to address is the fact that while businesses run on the money they produce, they succeed when they care about more than their bottom line. Call it the millennial ideology or just the optimistic perspective, but I truly believe that when we think of each other as human beings as opposed to just opportunties, we thrive as a community moving forward.
Source article: https://www.forbes.com/sites/jeffreydorfman/2016/09/23/price-gouging-laws-are-good-politics-but-bad-economics/#2f8d863e64d3