Wednesday, 23 March 2011

The problem with price gouging laws

The Spring 2011 issue of the journal Regulation contains an article "The Problem with Price Gouging Laws" by Michael Giberson.

As far as I can see the problem with such law is that they exist.

Giberson writes
Economists and policy analysts opposed to price gouging laws have relied on the simple logic of price controls: if you cap price increases during an emergency, you discourage conservation of needed goods at exactly the time they are in high demand. Simultaneously, price caps discourage extraordinary supply efforts that would help bring goods in high demand into the affected area. In a classic case of unintended consequences, the law harms the very people whom lawmakers intend to help. The logic of supply and demand, so clear to economists, has had little effect on price gouging policies.
(HT: Knowledge Problem)