Another natural disaster, another round of complaints about “price-gouging.” Per Business Insider, South Carolina’s attorney general reported 142 “price-gouging” complaints in the early aftermath of Hurricane Helene, while North Carolina’s AG claimed 64. Those numbers will multiply as electricity and phone service gets restored in the hardest-hit areas.
One South Carolina example from the Business Insider story: “[S]tores that have been putting out cases of bottled water for sale, but ringing up customers for each bottle individually.”
That is, charging the same price per bottle as previously — hardly “price gouging” — but without the usual discount for bulk “by the case” purchasing.
Or: Using normal, non-discounted, pricing to ration water so everybody can get at least some water, instead of a few customers taking home cases and other customers going without.
Even in cases of actual price increases (instead of temporarily ending bulk discounts), that’s the main effect so-called “price-gouging” has. Yes, you pay more for what you need … but you actually GET what you need for $2, instead of NOT getting what you need for $1.
Not, mind you, that sellers are “price-gouging” solely out of the goodness of their hearts. As Adam Smith pointed out centuries ago, “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.”
What serves the self-interest of long-term, reputable merchants? Customer satisfaction.
Your grocer was glad to sell you food last week. He wants to sell you food next week. He’ll do his best to sell you food this week.
If the roads are blocked and the supply is limited, he’d rather charge more and have more customers get at least some what they’re looking for than charge less and have more customers see a “closed, everything’s gone” sign when they show up hungry and thirsty after difficult treks over storm-ravaged roads.
“Price-gouging” isn’t, as some people pretend, a case of market failure. It’s markets doing their job, in the face of dire circumstances, getting goods to the people who need them.
If the circumstances weren’t dire, “price-gouging” would be a terrible idea … and an impossible one, since competition from down the street would clean the “price-gouger’s” clock.
Yes, non-profit “mutual aid” is a beautiful thing. But when supplies are short, “price-gouging” is the next best thing, offering you an option other than praying to FEMA and hoping for the best.
Thomas L. Knapp (Twitter:@thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.