Coronavirus

When 'Price Gouging' Is Good: Michael Munger

The Duke economist and political scientist discusses the response to COVID-19, the coming recession, and the end of higher ed as we know it.

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As the COVID-19 pandemic prompted shoppers to clear out supermarkets of toilet paper, rice, and canned vegetables, two brothers set out on a 1,300 mile road trip through the back roads of Kentucky and Tennessee. Matt and Noah Colvin loaded up a U-Haul with all the hand sanitizer and antibacterial wipes they could find and attempted to resell the goods on Amazon at a massive markup. Then the online retailing giant banned the practice, state attorneys general started cracking down, and the Colvins were shamed in the media. They ended up donating the items. 

But is so-called price gouging a bad thing? Michael C. Munger, who teaches economics, political science, and public policy at Duke University, argues that prices contain vital information about supply and demand. When governments attempt to mandate cheap goods, he says, they end up causing more shortages than they solve. And this is especially true during a crisis.

Nick Gillespie spoke with Munger via Zoom about how the 21st century is testing libertarian ideas about limited government and individual freedom.

NEXT: Dump the FDA for a Healthier America

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  1. Just like the oil shortage in the late seventies.
    When the OPEC-ers shut off the flow, the price of gas went up, but it was still available.
    Then the feds stepped in with price controls and the lines formed the next day.

    1. +1000

      This is 99% government’s fault. Price and wage controls. Anti-hoarding controls. Extending unemployment benefits to promote not working. Lockdowns.

      1. I keep seeing memes about how this is a failure of capitalism. I hope it’s some kind of reverse psychology and that people aren’t really that dumb.

        1. It’s not. They are that dumb. It’s called confirmation bias.

  2. Some grades of crude are at negative pricing right now because it’s cheaper than storing it.

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  3. This is why Bernie and his ilk are so popular, John Rawls wrote a whole book on it. Equality in poverty is preferable to inequality in wealth, a society where everybody makes $20,000 per year is better than one where 90% of the people make $50,000 and 10% make a million and most people are perfectly willing to cut off their nose to spite their face as long as everybody else is cutting their noses off as well.

    1. No they are not willing to be poor. They SAY they are but when it comes down to poverty, most Americans don’t want anything to do with that.

      Even poor people have to have a cell phone.

      It’s more ignorance of what they think Communism and Socialism can get them. The dum-dums believe that Socialism will raise them up when they take wealth from others. The are too stupid to read history and find out that everyone is poor except party bosses. Even Gorbachev was shocked to see American stores with groceries. Russian party bosses could not even get that kind of wealth.

  4. So the FBI, yeah the feds, went after some dude who stockpiled a bunch of N95 masks and tried to sell them at a huge markup. I wondered what law he broke. He was charged with not having a wholesale license. WTF? This is why the FBI raided him? Fucking ridiculous.

    1. The articles that mentioned it said the government will be paying him “fair market value” for the supplies, so of course he didnt break any constitutional law. Otherwise they would have given him no compensation.

      They are not going to give him just compensation as required by the 5th Amendment.

  5. There is no such thing as “price gouging”; that’s propaganda invented by econ-ignoramuses in the hopes of coercing price-fixing.
    Any price freely agreed upon between a buyer and a seller increases the wealth of mankind.

    1. Yes. And more importantly, prices are signals that allow supply to keep up with demand. Want more masks and respirators? Increase your bid.

  6. Price gouging is a meaningless term. If someone is overcharging, people won’t buy. If market conditions dictate an increase in price, then that’s basic economics.

    Unrelated – I’m back again after another extended absence. It looks like Reason remains in full TDS mode, and their biggest complaint is that el presidente isn’t authoritarianing hard enough.

    1. +1000

      Welcome back.

      TDS is still the order of the day for unreason and they have added in KungFlu hysteria.

      Another funny thing is that most of the unreason staff are cooped up in some city somewhere scared shitless. They think the rest of America is hiding in their safe space too, so most of the articles skew that direction as if Americans are actually complying with this hysterical nonsense by the media and state governments.

  7. I agree that government controls aren’t the solution for this.

    Is there not also room to disapprove of hoarders who create artificial scarcity? If you’re hitting up multiple stores to empty their shelves of hand sanitizer, suddenly there’s a local shortage of hand sanitizer. In time, a big healthy market will correct that by producing more hand sanitizer and redirecting shipments to that area. In the short term, someone is potentially creating a panic in order to profit.

    There’s a difference between letting the prices inflate naturally to let the market correct, and in letting individuals be exploitative in artificially raising prices.

    1. Well if individuals raise prices in response to expected demand (“gouging”) it prevents the hoarder from cleaning out all the shelves, so even though the next person pays more at least there is something on the shelves

  8. I agree that the government controls and should do that
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  9. Don’t know why there is an assumption that those price changes will necessarily lead to changes in supply. It just ain’t true – and this current pandemic is proving that many of those assumptions just ain’t so.

    Sure – you can raise the prices for say masks that are held in inventory in a particular location. And that will help maximize the value of that inventory. Hell, you can even do what the Colvins did and round up existing inventory in order to distribute it somewhere else.

    But it doesn’t mean the inventory will replenish itself – if eg the only place that produces the product is halfway around the world and won’t be sending you any anytime soon – and there isn’t going to be any increased production of any scale because barriers to entry have been created re the established. Nor is there the remotest direct connection that said inventory produces a better outcome if stored and profited from by the private sector rather than by some muni/govt stockpile.

    Now maybe there will be workarounds re some stuff – eg ‘ladies who still craft and sew’ will make some washable cloth masks that will garner a CDC ‘seal of newly-announced approval’. It has yet to be seen whether that will work at all re 3d printed open-source ventilators. And it certainly doesn’t apply to something like TP – where no one in their right mind will believe the hoarding is a sign of increased demand in future.

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