Texas Tech University

Price Gouging Technocratic Cranks

Economic Policy Journal

September 13, 2017

Economic Policy Journal - In The New York Times, Andrew Ross Sorkin provides a pretty decent explanation for why economists cheer on "price gouging" during disasters:[S]everal respected economists from the Milton Friedman school of free-market theory take it seriously. They contend that anti-gouging measures, by effectively enacting price controls during emergencies, remove the incentive for consumers to conserve essential supplies. They also say that the incentive for suppliers to bring goods to dangerous areas - or keep extra stock on-hand before disasters - becomes distorted in ways that hurt people..."

"Price caps discourage extraordinary supply efforts that would help bring goods in high demand into the affected area," Michael Giberson, an instructor with the Center for Energy Commerce in the Rawls College of Business at Texas Tech University, wrote in an opinion piece from several years ago that was widely circulated around parts of Wall Street this weekend. Meanwhile, he suggested, "You discourage conservation of needed goods at exactly the time they are in high demand."

Read the story here.