Economics of fear
If you were to chart peoples perceptions of price gouging it would generally range between ‘meh, its just supply and demand’ on the one end to ‘only the most despicable of human beings would EVER do this’ on the other…
Price gouging is a term referring to when a seller spikes the prices of goods, services or commodities to a level much higher than is considered reasonable or fair, and is considered exploitative, potentially to an unethical extent.
For example people selling a bottle of water before a hurricane hits that normally retails for $1 and then charging $10 for the same bottle of water…
Apparently a 3M N95 mask usually retails for about $1 to $1.50.
I’m usually carefully neutral about this, especially in polite company, but if under duress to answer I would likely lean towards ‘Meh, its supply and demand’. This is mostly because I am a heartless capitalist and godless ape… but also because the alternative of fixing prices is… well… it gets really complicated.
A store owner in a town that is about to get hit by a hurricane has ten generators which normally retail for about $750 each. Sensing that demand for his merchandise is about to peak he ups the price to $3000. He’s got something people want… and if they want it, they need to pay up.
Everyone is desperate but ten wealthy people are able to fork out the asking price and secure themselves lights and maybe Netflix for the foreseeable future. The ones that can’t afford it, or come late to the party are left disappointed. The villain in this story is clearly the greedy store owner… because what sort of person profits off the misery of others?
The complication is how otherwise does one decide who to sell the generators to? Should it be based purely on a first come, first served basis?
Or perhaps it should be based on the persons perceived need for a generator? What about the free-clinic or the animal shelter that desperately needed a generator, they could afford to buy one at $750 but not at $3000. Should they get preference?
Of course there are alternatives. People could get angry and burn the store down. ‘This is what we do to price-gougers’, they might shout. Fear of death and reprisal is a powerful motivating factor in reducing ones profit target…
… or I suppose, people could just refuse to buy the $3000 generator. Either because it is too expensive or they decided they didn’t really need a generator… faced with this prospect might the store owner be inclined to reduce his prices to move the goods?
What if the community took the generators by force… and then allocated them to various key points around the community where they they could maximize the benefit to the populace? Is that an appeal to the greater good?
What if the ten wealthy people that bought the generators donated them to the community? Or what if the ten wealthy people kept those generators only for themselves, are they now also villains in this story?
Of course generators isn’t clean water or ready-to-eat-meals… that is likely even more of an emotive concern.
I’m inclined to come down to the side of freedom. I.e the freedom for that shop-owner to do whatever he wants to do. If he doesn’t mind the vitriol directed at him or indeed his standing in the community suffering, he should be allowed to charge whatever price he wants to for his goods. Morality is a very difficult and indeed dangerous thing to legislate and even worse when you try and inflict your particular brand of ethics on other people.
But that’s just me. I blog from a position of plenty… its easy for me to make these types of pronouncements. But who knows, in reality, I might be right up in front with my pitch fork and burning brand. But maybe it is more likely I would be the shopkeeper shouting at everyone to calm the hell down and then trying to enunciate clearly my thoughts on freedom. Before getting hit in the head with a brick I mean.