Usually, with annual Spring price increases, we hear the perennial allegations of gasoline price gouging from politicians. Despite all the talk about high gasoline prices, there hasn’t been a lot of talk about price gouging this year.
The precise meaning of the term “price gouging” is sometimes hard to pin down, but a paper forthcoming in Business Ethics Quarterly tries to fix it enough that the meaning can be carefully examined. In “The Ethics of Price Gouging,” Matt Zwolinski describes price gouging as “a practice in which prices on certain kinds of necessary items are raised in the wake of an emergency to what appear to be unfair or exploitatively high levels.”
The definition includes three key elements that recur in most of the state laws against price gouging: an emergency period, necessary goods, and unfair price increases. Zwolinski surveys state laws to arrive at his definition, and while not every state law has all three elements, these three elements make up the core concept.
After defining price gouging, Zwolinski seeks to rebut three common beliefs about gouging: (1) that laws prohibiting price gouging are morally justified, (2) that price gouging is immoral, even if it is legal, and (3) that price gouging reflects poorly on the persons who engage in it, even if the act itself is not immoral. All three of these beliefs are wrong, or at least questionable, in Zwolinski’s view.
His position emerges from a basic understanding of economics, and particularly the role of prices in society. Zwolinski argues that anti-price gouging laws work to prevent individuals already in a vulnerable position from entering into what would be a beneficial exchange. Further, drawing on Hayekian notions about prices as information and coordination devices, Zwolinski asserts that anti-price gouging laws discourage extraordinary (or perhaps even ordinary) efforts to aid persons in need, because the laws interfere with information about scarcity and reduce incentives to act.
All in all, I found myself generally in agreement with Zwolinski. But, since he starts with generally libertarian foundations and flavors his ethics and policy examination with a heavy dose of economics, what is not to like? I was sympathetic from the beginning.
Still, I think most proponents of anti-price gouging laws, even if they agreed point by point with Zwolinski’s analysis, would still feel that price gouging was morally wrong, and would not oppose anti-price gouging laws. I’m increasingly convinced that morality is fundamentally a social manifestation of emotions.* Zwolinski’s point-by-point rebuttal of anti-price gouging positions barely touches on the emotional component. I suspect opponents of Zwolinski’s view would feel he just doesn’t “get it.”
So while Zwolinski is doing useful work – as are various economists who patiently explain the value of permitting “gouging” (or impatiently, and here, and here) – something more will need to be done before the anti-price gouging folks will finally “get it.” To understand the feelings behind price gouging, economists need to delve into the broader mysteries of emotional reactions to prices and allocations. Most economists don’t want to go there, and so they are left only to scratch the surface of the problem they want to resolve.
*NOTE: I’m slowly reading Jesse Prinz’s book on the subject, The Emotional Construction of Morals. More on it later.