Sunday, November 04, 2012

Gouging versus everyday pricing

I read a piece on the web by somebody complaining bitterly against gouging during an emergency on humanitarian grounds with which I sympathise generally. 

His argument was that 'low' or 'ordinary' prices should be maintained, either by law or by good moral standards.  He could have added by rationing (exercised by whom?).

It seemed to me that while its general line made good moral sense, especially about the very needy persons who would be excluded from the scarce items by their high prices, he has not faced the fact that if the shortage is severe and price maintained, a large number of people inevitably will still have to do without whatever good is scarce at some point soon. 

When what is available is sold out, some, perhaps many, would-be customers will be unable to acquire the scarce good at any price and they will join the many people who are unable to acquire the good above is normal price.  Everybody in this situation – likely to be everybody – will go without the missing good.

Now in emergencies we witness people filling up with petrol, some of whom will already have filled their tanks.  Apart from forming an orderly queue there is not much else they can do, assuming stealing is not a moral option for them or if there is absolutely none available at all, and nowhere to steal from, they too join the people doing without the good.

Apart from serious emergencies this is a normal condition in daily markets for people without access to money. Except in utopian communes, one does not meet people arguing in normal times for price controls or reductions – normal prices are not regarded as gouging - though we hear their complaints. 

Charities and volunteers can and do operate in normal times to collect donations of goods or money to supply to disadvantaged people – many of us donate to them.   There is a role in emergencies to provide basic supplies in times of social stress.

My point is that I am not sure that temporary fuel shortages in rich countries qualify for removing pricing systems generally.   At best they would be very short term – the existing stock runs out quickly in hours and long before normal supplies become available. 

When supply is fixed – tickets for seats at sporting event or pop concert, say – stopping gouging by policing prices and distribution is an unnecessary cost.  There are so many seats only, which when sold the market is over.  Individuals who miss out, miss out.  They do not go to the event; simple.  It is not a human right issue to attend a popular event.  If you get a ticket you stop somebody else going.  That’s life.

If you donate money, goods, and assistance in kind to charities (as I do regularly) as long as we have some money, spare goods, or the time, you address the moral issues involved. But the world cannot rely on benevolence alone; there aren’t enough goods to go round unless and until somebody toils to produce them.  Markets provide far more goods to go round than alternative means of producing and distributing them and to keeps doing so year in and year out, at least since the 1800s. 


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