Introduction
Many people consider price gouging immoral since it makes some people well off and others worse off. Whereas others argue that price gouging increases the availability of products to the market because customers can only buy what they can afford. Others claim that it makes low-income consumers suffer the most, and many nations have enacted gouging laws to protect consumers. Thus, this essay seeks to discuss price gouging and why several economists are against gouging laws. The essay will also explore why other economists support gouging laws and connect the arguments with real-world examples.
Definition of price gouging and some examples
Price gouging denotes when sellers and other retailers take advantage of surging demand by charging higher prices for supplies, usually following a natural calamity or other states of emergency. For instance, during the Covid-19 pandemic, a particular store in Hong Kong that sells a box of N95 respirator masks at HK$700 increased its price to KH$2,500 following the rise in demand. Another example is during the Hurricane, prices for flights and other items such as water increased much higher than usual costs. Moreover, a particular hardware store in Texas that usually sells snow shovels for $15 increased the price to $20 after the snowstorm. Thus, several countries, approximately thirty-four nations, have laws that forbid price gouging to protect customers.
Why several economists are against gouging laws
According to these economists, prohibiting price gouging removes the reason for customers to conserve crucial goods at precisely the period they are in high demand. They also claim that forbidding price gouging makes it difficult for consumers to access much-needed products. This is because if prices do not increase due to increased demand, many stores could become scarcities. Therefore, the increased costs of essential goods in places impacted by the emergency are crucial since it sends a gesture to the world, particularly places not impacted by the crisis, to increase supplies.
For example, increasing the prices of snow shovels sends a gesture to the world to send more snow shovels. This is because somebody who operates a hardware store a mile away could be motivated to pack more shovels in a truck and transport them to the market, lessening a possible scarcity and, possibly, directing prices back to normal. Therefore, according to these economists, the quickest way to fix products shortage is to increase their prices as consumers will buy less, lowering the incidences of products shortage.
Why do other economists support gouging laws?
Other economists disagree with those against price gouging laws claiming that artificially increasing prices make consumers worse off. This is because they will need to dig deeper into their pockets to afford the costs. Besides, consumers are already suffering the impact of the calamity; hence, increasing the prices of commodities is an added suffering. Therefore, gouging laws are crucial in protecting law-income customers by making prices below the market prices.
My opinion regarding gouging laws
I support the anti-price gouging laws. Price gouging, especially during moments of calamities, is morally wrong. Besides, increasing prices during difficult moments, especially during a disaster or emergency period, is unfair and could be a sign of greed. This vice should be discouraged since a good society stays together, especially during difficult times or disasters. On the contrary, a society where individuals exploit their fellows for financial benefits during moments of crisis or calamity is considered an immoral society. Thus, excessive greed is a vice that a good society needs to condemn. Therefore, price gouging laws help restrain the expression of such behaviour and indicate society’s condemnation of price gouging. By enacting gouging laws to punish greedy actions, society sustains the public virtue of collective sacrifice for mutual good.
Relating the arguments with real-world examples
In today’s world, there are many incidences of price gouging, particularly during emergencies. One incident is during the Covid-19 pandemic. During this period, prices of essential food items such as sugar, cereals, and groceries tripled the normal costs (Ifpri.org, 2022). Thus, states enact gouging laws to prevent such incidences from harming customers. For instance, in the United States, Senator Elizabeth Warren proposed the Price Gouging Prevention Act of 2022 to prohibit private firms from increasing commodities prices to an unconscionably extreme level during pandemics and natural disasters (Gullett, 2022). This makes firms offer services and products at below-market prices. However, this law has received several controversies. Supporters of this Act claim that the law will protect poor consumers, especially the low-income customers who have been hit by the disaster. However, those against the Act argue that the gouging law will cause goods shortages and hoarding.
Conclusion
Several individuals consider price gouging immoral, and many countries have laws that forbid price gouging. Price gouging laws are double-edged swords. On the good side, gouging laws protect low-income consumers from being exploited by greedy merchants, making consumers access goods at prices lower than market prices. On the bad side, gouging laws create hoarding and scarcities, worsening situations for such consumers.
List of additional references
Gullett, E. (2022). Why Elizabeth Warren’s Proposed “Anti-Price Gouging” Law Would Be a National Disaster | Fee.org. Retrieved 28 May 2022, from https://fee.org/articles/why-elizabeth-warrens-proposed-anti-price-gouging-law-would-be-a-national-disaster/.
Ifpri.org. (2022). Covid-19 and rising global food prices: What is really happening? Retrieved 28 May 2022, from https://www.ifpri.org/blog/covid-19-and-rising-global-food-prices-whats-really-happening.
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