Price Gouging Technocratic Cranks
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
"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.