Is Price Gouging Immoral? Should It Be Illegal?

Price gouging is usually defined as raising prices on certain kinds of goods to an unfair or excessively high level during an emergency. Although price gouging is illegal in 34 states, economics professor Matt Zwolinski asks whether price gouging should be illegal. He uses an example to examine the moral status of price gouging.

The following points suggest that price gouging may not be immoral after all:

  • Consumers do not have to buy products for the higher price. If they decide to pay, it is likely because they are getting more from the product than they’re paying.
  • If the prices for important goods do not go up, it is likely that scarce resources will not be available for those who need them most.
  • For buyers, high prices reduce demand and encourage conservation. People who may need something more are likely to pay more. For sellers, being able to charge higher prices creates a profit incentive to encourage more sellers to bring products to the market.
  • The profit motive will increase competition and eventually drive down the price.

What alternative institutions would do better? When price gouging is prohibited goods go to whoever shows up first. Even if we assume that price gouging is immoral, it almost certainly should not be illegal. The only reason price gouging occurs is because demand is high and supply is low. Professor Zwolinski argues that even if you think that price gouging is morally wrong, making it illegal doesn’t make sense. It hurts the very people who need our help most.

6 Comments

  1. Damian Gunjak

    I encounter these issues all the times where customers are never willing to pay premium for last minute service 

  2. Anonymous

    Clearly $800 is enough for them to make a profit, demand will be increased in the storm zone thereby increasing volume and profit without gouging.

    The parent wth the diabetic child is spending about $600 a month in insulin, pump supplies, test strips and doctors visits. Their ability to pay inflated prices due to gouging is unrealistic and is a great example of why health care prices are out of control. It’s a necessary commodity, not something people can simply stop using when it gets more expensive. Therefore prices grow out of control because, what are you going to do, stop buying your monopolized insulin / generators and die? Because you have strong armed someone into paying more for life saving technology is in no way moral.
  3. TylerHeald

    Can we get a video on emergency services to refute the idea that only government coerced emergency services work?

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