Justice, Promoting Virtue and Price Gouging

Michael Giberson

Michael Sandel appeared on the Today show last week promoting his new book, Justice: what is the right thing to do? The book and a related public television series this fall are based on Sandel’s course on justice taught at Harvard. (The television series episodes are online at the link just cited.)

The msnbc.com website provides an excerpt from the book in which Sandel discusses price gouging after an emergency.  He discusses the post-Hurricane Charley (2004) debate over price gouging in Florida, drawing on commentary by then-Florida Attorney General Charlie Crist, economist Thomas Sowell, and others.  Sandel identifies three sometimes competing values that seem to motivate the discussion: maximizing welfare, respecting freedom, and promoting virtue.

The excerpt appears to be from an introductory chapter, Sandel is framing the issue rather than pushing a conclusion. From what little I know about Sandel, I assume he will end up leaning on the “promoting virtue” value and conclude that price gouging should be penalized by the government because it violates an ideal (held by some people) about how people ought to treat each other.  This introductory excerpt does a reasonable job of laying out competing positions, but given the breadth of issues addressed in the book I wonder how deeply Sandel goes into the issue.

Surely an ideal that says a merchant should not raise prices after an emergency would also say that merchants should not take useful goods off of the market after an emergency (by closing shop, by refusing to restock at available wholesale prices). If we should, under a conception of virtue  to be promoted by government activity, penalize price gouging, then why don’t we penalize these actions which are necessarily more damaging to the community?  It is increasingly becoming clear that penalties for price gouging are encouraging these more harmful reactions by merchants, so it appears that “promoting virtue” may require more forceful government intervention in post-disaster markets.

I don’t know whether Sandel does, in fact, make the “promoting virtue” value central to resolution of conflict over price gouging.  Maybe he leans towards maximizing welfare or respecting freedom, or maybe he uncovers some framework which neatly sorts out the competing virtue claims.  In any case, the excerpt seems to have done its job, because now I am interested in how Sandel handles the issue and may go buy the book.

7 thoughts on “Justice, Promoting Virtue and Price Gouging

  1. “It is increasingly becoming clear that penalties for price gouging are encouraging these more harmful reactions by merchants, so it appears that “promoting virtue” may require more forceful government intervention in post-disaster markets.”

    Let me get this straight. Government intervention in markets encourages harmful reactions by merchants, so therefore we need more forceful government intervention? Perhaps that would encourage even more harmful reactions by merchants. That would then provide justification for eliminating private merchants in favor of government distribution. (Think GUM.)

    Shirley, you jest! 🙂

  2. The things that gets me about this issue is the effect on the supply of the good. The government can force a retailer (assuming they don’t close shop) to charge a certain price, but they cannot force sellers into the market. The opportunity for windfall profits increases the supply of goods available.

  3. To clarify, Ed, I’m not recommending more forceful government intervention in post-disaster markets, I’m suggesting it is the natural development of an argument that says the government should try implement anti-price gouging laws as a way to promote virtue.

    And to further clarify, I’m not saying that anti-price gouging laws actually promote virtue, just observing in the post that Sandel identifies “promoting virtue” as one of the values that motivates some positions on price gouging.

    As a matter of fact, I lean toward a view suggested by Robin Hanson’s argument discussed here last week, namely that anti-price gouging sentiment yields a mistaken viewpoint on what is actually virtuous. Therefore, it is likely that simple efforts to “promote virtue” end up enforcing mistaken prejudices about what is good for a community.

  4. Ed, I’d add a “especially in North Carolina” tag to your comment, but I’m living in Texas and I’m sure our politicians can out-“promote virtue” your politicians. (Now New York politicians may give the Texans a run for their money….)

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