Art Carden on price gouging

Michael Giberson

Art Carden, in his Economic Imagination blog at Forbes.com, explains “Price Gouging Laws Hurt Storm Victims.”

How many people see natural disasters like the tornadoes in Tuscaloosa, Alabama, and Joplin, Missouri and say “we should be working to impede the recovery and make life harder for storm victims?” Probably no one. How many people see prices rise after natural disasters like the tornadoes in Tuscaloosa, Alabama and Joplin Missouri and say “we should prosecute ‘price gougers!’”? Probably a lot. And yet prosecuting price gougers makes life harder for storm victims.

I like Carden’s article not because he quotes my Regulation article on price gouging and gives me another reason to link to it (well, I like Carden’s article not only because…), but because he states the main problem with price gouging laws so clearly: “prosecuting price gougers makes life harder for storm victims.”

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One thought on “Art Carden on price gouging

  1. The mere existence of a law which permits prosecution of “price gougers” discourages any extra-normal effort to assist victims, since just the likely cost of defending against the potential prosecution is so much greater than the potential gain from the increment charged for the extra-normal service. That would be true for established retailers, who might put forth extra effort and experience extra costs to bring additional quantities of goods from unaffected regions. It would be true for “opportunistic entrepreneurs”, who might purchase a truckload of generators, etc. and bring them to the affected area for sale, because their costs would be higher than those of established retailers under normal circumstances. It would also be true for service providers willing to work extra hours at overtime rates.

    Faced with the potential for adverse action by a state Attorney General and the consequent need to retain counsel, the prudent individual or company would likely choose to avoid the attendant risk. While it might be difficult to watch other peoples’ suffering, it would be less difficult and less expensive than trading their suffering for your own.

    Not all unintended consequences are also unanticipatible.

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