Price Gouging?

When fear mongers and pandering politicians (pardon my redundancy) call market pricing “price gouging” they are attempting to manipulate the vulnerable into submission.

Raising prices in times of short term shortages caused by disruptive events is the most compassionate path possible! Keeping prices below the equilibrium price free markets automatically provide guarantees inappropriate allocation and shortages and pain. And sometimes death.

Example 1:
Bottled gallons of water sell for $1 each. A tornado/fire/earthquake/bomb/etc. destroys the municipal water supply.

With government price controls:  Without the raising of prices above $1, the supply is quickly purchased by the first few individuals to get to the stores. Those few have enough water to drink, bathe, flush toilets, wash the dog, etc. The masses drink what they happen to have — water, juice, milk, soup, etc. but start dehydrating within a few days. Some drink contaminated water and get sick. Some die. Compassionate individuals act alone and through charities to get water to the area ASAP but some time is required. Government also acts to take from one group (taxpayers) and give to another (victims) but there is a time required there too.

Without government price controls:  The store owner acting on either greed or compassion (it doesn’t matter) raises the price to $5 per gallon of water. People don’t wash their dogs. They don’t stockpile so excessively. They buy what they need and leave some for others in need. The stores continue to adjust their prices in order to maintain some supply for those individuals (both charities and victims) who have the greatest needs to meet. There is now more time available to restore production before people die in mass.

Example 2:
Motel rooms are $100/night. A disaster forces evacuations and a shortage ensues.

With government price controls: All the rooms are quickly rented and filled at only slightly above average occupancy rates per room. Many more sleep outside, in cars, under bridges, etc.

Without government price controls:  Rooms rent for $500/night. Extended families and even strangers combine resources to put large numbers of people into the rooms. Crowded but with heat, air, water, toilets, etc. Fewer are unable to get shelter. Compassionate individuals will be better able to allocate resources to those most in need as well. This is because they will be able to outbid the selfish in some cases. That is illegal with price fixing. People will find inside room for expectant mothers and the like.

Conclusion:

Artificially low prices in times of emergency cause shortages and pain.