Michael Salinger on Price Gouging in the Wsj

Lynne Kiesling

Greg Mankiw beat me to it yesterday by linking to and excerpting Michael Salinger’s commentary on price gouging in Saturday’s Wall Street Journal (subscription required). Salinger, who is currently at the FTC (on leave from BU), draws his commentary from a recent FTC report on “price gouging” (I haven’t read it yet, maybe it provides a definition for “price gouging”) in retail gasoline markets. Worth reading.

2 thoughts on “Michael Salinger on Price Gouging in the Wsj”

  1. Haven’t read the WSJ piece, but did skim the FTC report on price gouging. As I recall, in the report the FTC mentions that “gouging” doesn’t have a precise economic definition. However, the law in which Congress directed the FTC to produce the study included a definition and so the FTC something to work with.

    Roughly, Congress said the FTC should look for significant increases in price that weren’t justified by increases in cost. From skimming the report I got the sense that the FTC did a pretty good job of explaining the economic forces at work during the disruption of normal supply channels while staying true to the definition of gouging legislated by Congress.

  2. “The rule of law, in complex times,
    Has proved itself deficient.
    We much prefer the rule of men!
    It’s vastly more efficient.
    Now, let me state the present rules,”
    The lawyer then went on,
    “These very simple guidelines
    You can rely upon.
    You’re gouging on your prices if
    You charge more than the rest.
    But it’s unfair competition
    If you think you can charge less.”

    “A second point that we would make
    To help avoid confusion:
    Don’t try to charge the same amount:
    That would be collusion!
    You must compete. But not too much
    For if you do, you see,
    Then the market would be yours
    And that’s monopoly!”

    –excerpt from Tom Smith and His Incredible Bread Machine

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