Thursday, 26 April 2012

Is price gouging immoral?

That is the question considered in this video from LearnLiberty. The video features Matt Zwolinski, an associate professor of philosophy at the University of San Diego, who has written on the topic of the morality (or otherwise) of price gouging.

Price gouging is usually defined as raising prices on certain kinds of goods, e.g. petrol, to an unfair or excessively high level during an emergency, like an earthquake. In the U.S. price gouging is illegal in 34 states and many people would like to see it made illegal here in New Zealand as well. But Matt Zwolinski asks whether making price gouging illegal really is the best policy option. He uses an simple example to examine the moral status of price gouging.

The following points suggest that price gouging may not be immoral:
  • 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 then 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.
Zwolinski then goes on to ask, 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. Matt 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.

1 comment:

alejandro said...

yes it is immoral and he should be punished for it. send free text messages at