The One-sided Debate over Price Gouging

Michael Giberson

John Carney proposes declaration of free-trade zones for gasoline in shortage-afflicted areas. Prices could stay regulated elsewhere, but consumers and merchants would gain the option to trade at higher prices within the zones. Great idea, but there is zero chance that very visible politicians will want to be upstaged by an invisible hand, especially right before an election.

Carney, too, notices that price gouging laws are taking a beating on the internet. Critics of the laws are everywhere, and he wonders where the thoughtful defenders are?

One title that sounds like a candidate for a thoughtful defense is David Futrelle’s “Post-Sandy Price Gouging: Economically Sound, Ethically Dubious.” Unfortunately, there is no defense; he never explains just what about gouging is ethically suspect.

In the wake of a calamity like Superstorm Sandy, is it fair for businesses — from corner bodegas to gas stations to car services — to jack up their prices, earning windfall profits off the desperation of their customers? There aren’t a lot of people who would answer yes to that question; in the midst of the devastation of Sandy, this sort of price gouging seems not only deeply unethical but almost, you might say, treasonous. One disgruntled consumer told’s John Carney he considered it a kind of “reverse looting.”

So it was hardly surprising to hear New Jersey Governor Chris Christie issue a blunt warning to merchants that price gouging is illegal and brings harsh penalties. “During emergencies, New Jerseyans should look out for each other,” Christie said in a statement, “not seek to take advantage of each other.” New York Attorney General Eric T. Schneiderman issued a similarly stern warning.

Futrelle then observes that one strange group of people who don’t object to price gouging: economists. Economists, conservatives, and libertarians have come out swinging against the price controls, he says, “and so we’ve seen a very strange debate take place in the media in recent days.”

But, as Carney noticed, there is no debate going on. A lot of critics are claiming that, in one way or another, price gouging laws are hurting the people they are supposed to be helping. And on the other side of the issue we get the suggestion that price gouging is “deeply unethical” and “almost treasonous.” Not exactly a thoughtful rejoinder. (I think for many defenders, they feel so deeply that they are right that they haven’t felt the need to justify the position.)

Futrelle wraps up:

Oh, the economics of it makes perfect sense. It’s just that right now, with so many people suffering, the cold logic of capitalism seems callous and morally suspect, an affront to basic notions of fairness. Price gouging might, at least in theory, help shrink lines and reduce shortages. But I think most people would rather wait in line than have someone make a windfall profit off their desperation.

Maybe Futrelle is right. Maybe people would rather stand in line for hours to get a little gasoline than pay more cash for gas. But rather than pontificate, we could just give people a choice. Why don’t we just set up some of Carney’s gasoline free-trade zones?

Here are the two sides to the debate: Futrelle’s pro-“notions of fairness” side that uses government’s time and money to prevent people from having a choice, and Carney’s pro-choice side that would let people decide for themselves how they spend their own time and money.

Carney’s side of the debate is well represented online. Like Carney, I’m looking for a thoughtful explanation of Futrelle’s pro-government involvement, anti-choice point of view.

[HT to Matt Zwolinski for drawing my attention to Futrelle’s article.]

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