2022 April 4
Price gougers are doing the Lord’s work by helping rationally ration scarce supplies. It feels wrong but the alternatives are all worse!
This rant is brought to you by us having toilet paper stacked floor to ceiling at the beginning of the Covid-19 pandemic. People were in-some-sense-irrationally hoarding toilet paper so we rationally stocked up and were glad we did when it disappeared from store shelves. It’s cheap, non-perishable, we have plenty of room. Really it was a no-brainer to buy all that we can carry. (I’m exaggerating, though; I don’t think we ever got above 100 rolls.) We later learned that a friend of a friend spent hours driving all over the city desperately trying to find any single package, having completely run out.
I feel like a lot of my friends will hear a story like that and make snarky comments about capitalism and I just want to argue that in this context they’re profoundly wrong and the answer is absolutely more capitalism!
There’s a can of worms here about unjustness in wealth inequality, which I’m keen to sidestep. Mostly I don’t want the perfect to be the enemy of the good. So-called price-gouging is still a praiseworthy, pro-social thing even before we have universal basic income or whatever.
There’s a New York Times article about these guys that drove all over buying up hand sanitizer at the start of the pandemic and then tried to sell it on Amazon (until Amazon cracked down on price gouging). Creating an artificial shortage of hand sanitizer and then raising the prices is definitely different than loading up a pickup truck with bottled water and hauling it into the depths of a hurricane zone.
But I think even the market-manipulative hand sanitizer story proves the point more than being an exception. Because if stores weren’t shamed and punished for so-called profiteering then they’d have already upped the prices and made the hand sanitizer shenanigans that much less likely in the first place.
Or suppose the stores failed to do that and the shenanigans happened. It’s only profitable if they actually sell it, which means getting it to those most desperate for it. Kind of.
My general feeling is that you have to treat it as totally verboten [1] to tamper with supply and demand. If you end up with some kind of unjustness, like poor people not being able to afford toilet paper, you have to address that separately, like with toilet paper vouchers or different tax policies. (For simple things like toilet paper, capitalism will tend to address it fine. Making toilet paper gets lucrative so more is made!) Trying to address allocation problems by controlling prices invariably, inexorably backfires.
[1] Verboten is the German word for forbidden. As Richard Dawkins puts it, typically one switches languages to indicate profundity.
Thanks to Bee Soule, Christopher Moravec, Laurie Reeves, and Melanie Wicklow for commenting on drafts of this.