In Defense of Price Gouging

By:  Selwyn Duke
11/14/2012
       
In Defense of Price Gouging

In the wake of Hurricane Sandy, there has been much talk about price gouging. New Jersey is prosecuting some who engaged in it, and pundit Bill O’Reilly has threatened to put offending gas stations in his fearsome Factor pillory. But is this prudent?

In the wake of Hurricane Sandy, there has been much talk about price gouging. New Jersey is prosecuting some who engaged in it, and pundit Bill O’Reilly has threatened to put offending gas stations in his fearsome Factor pillory. But is this prudent?

To be clear, I personally wouldn’t want to raise prices amidst a disaster were I a provider of products or services. And I’m not alone: After devastating floods struck the Margaretville, New York, area last year and destroyed the local supermarket and drug store, the only remaining mass supplier of food, Dollar General, refused to increase its prices (its nobility earns it a plug). Yet is it beneficial to use government to compel all businesses in disaster-stricken areas to follow suit?

Obviously, there is no action without motivation. If someone provides products or services, he does it for some reason, such as profit, a feeling of gratification, the idea that it’s God’s will, or out of some conception of what’s right. And that there are so many more businesses than charities in the world indicates that profit is a far more common motivator than all the other reasons combined. This is why business owners who would, left to their own devices, hold the line on prices during disasters are probably in the minority.

Now, one problem during disasters is that some businesses may be destroyed or temporarily shut down, and deliveries of goods are often impeded. Thus, the remaining businesses would have to go the extra mile to maintain inventories that can satisfy demand. But what will induce them to do so? Sure, there are the Dollar Generals of the world that may be driven by charitableness, but what of that profit-motivated majority? Remember, especially during disasters, we want not just some but all available businesses serving the people; this delivers the most help to the most victims.

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Selwyn Duke (photo)

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