“Four things have almost invariably followed the imposition of controls to keep prices below the level they would reach under supply and demand in a free market: (1) increased use of the product or service whose price is controlled, (2) Reduced supply of the same product or service, (3) quality deterioration, (4) black markets.”
Many of my readers may think I’m putting this quote up because of Obamacare and socialized medicine in general. While applicable, the two real reasons is because I’ve been listening to Dr. Sowell’s Basic Economics and because I was taking with one of my co-workers about price gouging during an emergency.
Some of the people I talk to are surprised when I tell them that there is no such thing as price gouging and oppose laws that try to dictate prices, even during an “emergency.” If anything, those prices keep “scarce resources” (as Dr. Sowell refers to them in his works) available for those who truly value them. Most people wouldn’t pay $20 for a can of milk, but a mother of an infant in the middle of a disaster will. By charging that high price, the scarce resource is held for the person who highly values it. Also, the high profits from such trade invites competition into the market, which will bring down the price.
“That’s nice, but what about those who can’t afford those demand-driven prices and are in desperate need?” This is where I veer sharply away from the objectivists. I do believe in charity. I do believe this is where focused non-governmental organizations (NGOs) can have their biggest impact by making sure that resources that are scarce within the emergency area are brought in from areas with surpluses and directed to those who can’t obtain them.
I’m also a believer in protecting scavengers during an emergency situation. People trying to find supplies in abandoned stores should not be prosecuted. By supplies, I mean items essential to survival. Coming out of a Best Buy with four flat screen TVs is not scavenging. That’s looting. You shoot looters, you help scavengers. At some point, I’m willing to compromise on property rights to save lives. I’m human, I’m allowed some mental contradictions.
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