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Saturday

This latest Supreme Court nomination season has been curiously devoid of the mention of "litmus tests", so I thought I'd offer one here, for those that like to think of themselves as supporters of free markets and freedom in general.

What do you think about the idea described in the title of this article?

And another question, one that I usually very scrupulously avoid ever asking or answering, how do you feel about that idea?
When answering the latter, try to separate what you think others think you should feel, what you think others will think of you for feeling a certain way, and just get at what you actually feel.

I've been involved in a few discussions about this topic, most notably here and here. Read those, and my comments at the first link, and you'll see both what I think and how I feel about the subject.

Price "gouging" is where the rubber of freedom and free markets meets the road. There is no such thing as price gouging, nor is there any such thing as an illegitimate price. The idea that there is either is entirely incompatible with the idea of free markets. The effort to stop "gouging" is entirely incompatible with freedom.

I don't want to limit the 'gougers', they provide a valuable service and what they do is good - not just because it is their right to do it, but because it is a net benefit in making the situation better, and better faster, than it could be otherwise.


This gets to the heart of the issue. There's two important points here. The first, and the overriding one, is that anyone who has something to sell has an inalienable right to set the price he will sell it at, or to refuse to sell it at all. Nothing, no amount of desperation or need, can ever obviate that right. Attempting to do so is simply theft, no matter how desperately needy you are.

This sounds, to many, like putting my principles above doing the right thing. It is not. Rights and the right thing are all part of a fully integrated conceptual whole. No part comes above any other parts. But some parts come first. Not above, but first, in that some parts are the basis for other parts. Rights are the primary principle on which one branch of what is right is based. In this context, what is right is what I have a right to.

But rights are themselves based on something. They are based on the naure of human beings and our fundamental natural needs. They are based also on the nature of scarce resources, how they are produced, how they are distributed, and how they are valued. That means that rights, when taken as primary, and free markets when taken as principle and not subject to modification by immediate expediency, are perfectly congruent with "what is right" in specific instances. That is why free markets, even when they lead to $20 bottles of water after a hurricane, are good and right even in a purely utilitarian context, because the provide "a net benefit in making the situation better, and better faster, than it could be otherwise."

That is always true of valid principles - they lead to the best result because principles are by definition (at leaast by my definition, for my principles) those things which always lead to the best result. The moral is the practical. Always. An integrated whole.

...The same works in a shortage situation. The goal is to sell 100% without creating demand for 101%. ... If you reach this goal, not one fewer person has access to what you are selling than if you sold it all cheap and ran out in 10 minutes.

The benefit of selling everything you have in a way that maximizes your profits is that then you can turn it around and use those profits to maximize your capacity and thus serve even more people. The guy who won't raise his prices can't do that, at least not to the same extent.

The secondary benefit, entirely unrealized by the guy who won't raise his prices, is that those people who do get your product are those who need it the most. Fewer people will buy a second or third bottle of water, just in case, or top off their gas tank even when they don't plan on doing much driving. That means that the mother with the dying baby, who is totally out of luck with the guy selling cheap because some guy down the block bought a whole case of water to wash his car with, will have water available to her.


The effect I didn't mention in the quote above is that merchants who know they will be able to sell at higher prices after a disaster will have more incentive to stock up a little bit ore prior to the disaster. And those who know they will not have access to free or artifically low-priced resources in such times will also stock up, even a little bit, just in case. Both have the effect of increasing the supply and thus lowering the prices that the "gougers" can charge.

To try to deprive people of the power of free markets to solve their problems is not only wrong in principle, it is wrong in terms of expediency. It does harm to the people who need markets the most, at the time when they most desperately need them. This is an example of putting principles ahead of people. As I told one poster in my comments (much more rudely than he deserved):

So your feel-good "let's not take advantage of anyone" attitude actually has the effect of limiting the resources available, forcing more people to go without, and failing to steer what resources there are to where they are most needed. In a time of such crisis, I find this unacceptable.

I hate people like you who put your ideology ahead of helping people. You're a cold-hearted bastard.


So what do you think about price "gouging"? How do you feel about it? If you understand markets and freedom, you'll know it's a good thing. You'll know prices are information about scarcity and need, that even in normal times, seeking profit means seeking out ways to provide the highest possible value to others. You'll know that the temporarily higher prices in times of disaster serve to direct resources, both goods and labor, to where they are most needed.

If you really believe in markets and freedom, then you'll feel good about rising prices after a catastrophy. You'll see it as the begining of healing and a natural way to efficiently ration very scarce resources rather than as the collapse into depravity of immoral, greedy parasites.

From both perspectives, you'll see that asking "how can I profit?" is identical to asking "how can I help?", but that it doesn't matter if deep down inside you really want to help, or if you just want to make a profit. Pursuing your own rights, your own profit, and your own values is the right thing to do in any situation.

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