Price Gouging?

Posted on September 2nd, 2005 by Todd W

Can someone give me a reasonable definition of price gouging? I keep hearing the term bandied about, but I’m trying to figure out how a term can ever apply under Capitalism.

Anyone want to talk about supply and demand in times of crises? Could be fun.

Filed under: Katrina

5 Responses to “Price Gouging?”

  1. Chris Gidman, on September 2nd, 2005 at Said:

    Here’s what Wikipedia says:

    Price gouging refers to a sharp, temporary increase in the price of items that are in high demand because of a civil emergency, without a generally recognized justification or in breach of contract.

  2. Chris Gidman, on September 2nd, 2005 at Said:

    http://en.wikipedia.org/wiki/Price_gouging

  3. Todd W, on September 3rd, 2005 at Said:

    Contractual matters are one thing. If there is an agreement, it needs to be honored.

    But a ‘generally recognized justification’? What does that mean? If I have 1,000 gallons of gas in my station and I am in receipt of news that suggests I will have to pay many times more to restock, then I am perfectly justified in finding the price that the new market will bear. I have a limited supply of fuel, so it is available to those that wish to pay. A higher price discourages frivilous consumption and preserves the supply for those that most need it (and are willing to communicate that need through paying the price).

    This is perfectly appropriate.

  4. Chris Gidman, on September 3rd, 2005 at Said:

    Todd, I’m not going to try to defend the definition. I’m with you on this. It looks like generally recognized justification is a covert term for the will of the people. That is, if the general consensus is that you are charging a profit without justification, then you are price gouging. It’s up to the general populus to determine what is proper justification at the time you charge the price.

    Looks like hidden collectivism. Don’t you think?

  5. Todd W, on September 3rd, 2005 at Said:

    Exactly. Gouging is just a term used to castigate those that are providing goods and services in a time of crises. Price controls simply create shortages, every time they are tried. Anyone remember the Nixon price controls in the 70s? Where do you think those gas lines came from?

    If a product is held at artificially low prices, consumption does not change and the product will become scarce.

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