Reply to post: Re: Price Gouging: the free market libertarian perspective

World's smallest violin to be played for opportunistic sellers banned from eBay and Amazon for price gouging

doublelayer Silver badge

Re: Price Gouging: the free market libertarian perspective

The argument has some merit, but has major flaws. First, the validity. If prices increase, you do get the benefits stated, including the discouragement of hoarding and the incentive to produce. Those are easily verified, and are quite real.

However, allowing the price to increase has some predictable results. The first is that it increases the number of people searching for the products--if the price doesn't change with complete fluidity, and it won't, it offers the opportunity for useless arbitrage. Arbitrage is often a relatively harmless and sometimes even beneficial utility in markets, but when the product being moved around is a necessity, it adds delays, shortages, and risk. Those don't help anyone.

Second, increasing the price places many restrictions on who can obtain the product and how. It may deny it to the people who need it most--if they cannot afford it, or if they cannot easily arrange transportation of the product to where they are, or if they cannot charge the purchase to their company accounts because the seller is unusual, they will suffer. In economic terms, this is a profound negative externality, and even the most free-market of economists recognize this as a problem needing fixing.

Finally, it's just stupid. Sure, it can provide some benefits to a few lucky people, but at the cost of everyone else hating them. Meanwhile, the lack of the products people need leads to fear, and the unusually high prices they're eventually forced to pay leads to more hatred. When a bottle of fear and two of hatred are placed together in the blender, the result is a very unpleasant substance. The only two guarantees about what happens when the top comes off are 1) you can't stop the top from coming off and 2) you really won't like it when it does.

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