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.