Price Gouging: A Myth
by Steven Thomas Druckenmiller
In the wake of Hurricane Katrina, the mainstream media is tossing around the mythological phrase “price-gouging.” One of the most onerous and terrible phrases in modern vernacular, price-gouging is an anti-concept. When one examines the epistemological meaning of the phrase, it becomes apparent that it is based on nothing but incendiary pseudo-Marxism and has absolutely no basis in reality.
The idea of price-gouging is based on the premise that individuals with goods who sell them in times of crises for prices above what is considered “normal” are immoral “leeches” who take advantage of the needy in their most dire times of need. Examples in the current crisis have been touted from news sources all over the dial, including the supposedly conservative Fox News. So-called “evidence” of price-gouging, such as $10 bags of ice and $6 gallons of gasoline, are used to outrage the sensibilities of the average American. However, an examination of these examples and the entire concept of price-gouging show it to be a leftist house of cards.
The market operates on the simple concepts of supply-and-demand. In times of need, demand goes up. When demand goes up, prices go up. It is just that simple. Allow us to analyze an example. In the example of exceptional prices as it pertains to gasoline, an example which we can all appreciate, the price is necessary in the times of crisis. If gas were to be sold for $3 a gallon, the market would be opened up to individuals who do not necessarily need it more than others. The storekeeper who wishes to power up his generator so he can sell food to the needy again will have to compete with everybody else, with others who need it less.
However, this is not to say that the market is to be founded in utilitarian bromides. The individual with the gasoline not only has the right to sell his highly valued good for the price that people are willing to pay, it also just makes societal sense. If, in a fit of so-called “benevolence” (used here in the typical leftist fashion of self-sacrifice), gas owners decided to sell gas for $1 a gallon, there would be no gas to be had. When prices are below optimal, demand will massively outstrip supply, and those who are willing to pay more, and therefore value the gas more, will be out of luck—as individuals who are just merely in the mood, rather than truly in need and valuing the gas, will destroy supply.
The idea, then, of price-gouging is garbage, pure and simple. The foolish concept that individuals with goods to sell who market them at crisis prices are somehow “profiteering” and “price-gouging” is a vicious lie. These enterprising individuals are actually risking their lives to bring much needed goods to what has amounted to anarchical war zone. By selling these goods at the prices the context dictates, they are not only helping themselves, they are providing a service to an area which needs civility badly. Stop calling it price-gouging and start calling it what it is: a merger of self-interest and a civil society.
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