“Price caps discourage extraordinary supply efforts that would help bring goods in high demand into the affected area,” Michael Giberson, an instructor with the Center for Energy Commerce in the Rawls College of Business at Texas Tech University, wrote in an opinion piece from several years ago that was widely circulated around parts of Wall Street this weekend. Meanwhile, he suggested, “You discourage conservation of needed goods at exactly the time they are in high demand.”
He added, “In a classic case of unintended consequences, the law harms the very people whom lawmakers intend to help.”
My Regulation magazine piece was “widely circulated around parts of Wall Street this weekend”? I guess I have now achieved my high school ambition to make my mark on Wall Street.
I was also quoted on Marketplace radio program’s September 1 story on price gouging with the same economically-informed, popularly-disdained view.
And I’m not the only one. There has been a modest outbreak of price gouging commentary from economists.
- Ball State economist Steve Horwitz appeared on CNN over the weekend to discuss the benefits of high prices in a segment following Florida Attorney General Pam Bondi (in which she promised to prosecute, name and shame businesses that raise prices too much).
- Florida Gulf Coast University economist Victor Claar appeared in the Detroit News arguing “Price gougers deserve medals.”
- Tyler Cowen’s Bloomberg column, “Price gouging can be a type of hurricane aid,” also mentioned in the New York Times Deal Book column.
- David Henderson was interviewed for Tom Wood’s podcast, “‘Price gouging’ is urgently necessary.”
- Henderson also blogged on “Thaler on price gouging,” responding to Richard Thaler’s comments included in the Marketplace radio program. See also Don Boudreaux’s response, “Thaler’s Argument Fails.”
- Investor’s Business Daily editorializes in favor of gouging.
For a different view, at the Harvard Business Review blog pricing strategy consultant Rafi Mohammed explains, “Why Businesses Should Lower Prices During Natural Disasters.”