MENU

Reason.com

Free Minds & Free Markets

Stossel: These Students Know More Than Politicians

Politicians condemn price gougers, but students explain why "gouging" is good.

"Gouging" becomes an issue every hurricane season. After big storms, some people raise prices. Then politicians and the media freak out. Both demand tougher laws against "gouging."

But Nobel Prize winning economist Milton Friedman says, "the gougers deserve a medal" because they take risks to bring in goods that people desperately need.

Annelise Kofod, Erika Lewis, and Maggie Hroncich are students who get that.

They are winners of the contest held by John Stossel's Charity Stossel in the Classroom (SITC). They collected $1500, plus a free trip for them and their teacher to visit Stossel in New York City.

This year's contest invited students to write about "price gouging."

"When people hear 'price gouging' they think, oh, 'gouging'—this awful thing. But it really is kind of just another name for 'supply and demand,'" explains 17-year-old Annelise Kofod of Raleigh, North Carolina, who won the High School video award.

"Supply and demand," she says in her video, can help people get things they desperately need.

Stossel's classroom video reports on a so-called gouger, John Shepperson. Watching news reports after Hurricane Katrina, he learned that people desperately needed electric generators. So Shepperson bought 19 generators and drove them 600 miles to the hurricane disaster zone. He offered to sell them for twice what he paid. Lots of people wanted to buy them.

But Mississippi police called that price gouging. They confiscated his generators, and locked him up. Did that benefit the public? Stossel doesn't think so.

Erika Lewis of Towson University, who won the college-level video category, says, "as I did more and more research I was like, 'ok, maybe price gouging isn't such a bad thing.'"

Maggie Hroncich of Grove City, Pennsylvania, won the high school essay contest. She points out that, "actually, the price gougers are the moral ones."

Stossel agrees. He's glad that SITC students understand the benefits of market forces, even when politicians and the media don't.

Subscribe to our YouTube channel.
Like us on Facebook.
Follow us on Twitter.
Subscribe to our podcast at iTunes.

The views expressed in this video are solely those of John Stossel; his independent production company, Stossel Productions; and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Doug Heffernan||

    There's an idea for a reality show.

    Something like "Extreme Gouging", where the highest gouger gets a medal on air. Only individual gougers that gouge during a natural disaster are eligible. Everyday concerns like the pharmaceutical and financial sectors are excluded.

  • mtrueman||

    First prize is a weekend in New York with Stossel where you will be benevolently gouged.

  • Longtobefree||

    Second prize is a week with Stossel.

  • Eric||

    Why exclude pharma? I think a good one would be pharma execs auctioning off patented life saving medications in a pediatric oncology ward. Stossel could host.

  • Jerryskids||

    "Price gouging" only measures the value of the dollars in the cost calculation, it ignores the "time gouging" that takes place if the dollar value is kept inelastic. Water, food, gas, a safe, dry place to sleep are all readily available to disaster survivors at normal prices - about a two-week hike away if you're of average physical fitness. How much something costs isn't simply a matter of what's on the price tag on the item, a loaf of bread on the shelf at the store may cost $2.89 but assuming you want the loaf of bread on your kitchen counter and not on the shelf at the grocery store, it's going to cost you a lot more than $2.89 for a loaf of bread. Which is why your conveniently-located convenience store sells bread at $3.89 per loaf and still finds ready buyers, the time savings more than offsets the additional money cost. And why the "free" bread in communist countries costs you 4 hours of standing in line.

    You want a $600 generator or a $1200 generator? One's going to cost you an additional 1/2 hour of time to acquire from the guy on the corner selling generators, the other's going to cost you 2 days worth of travel under dangerous conditions to acquire from the nearest city outside the disaster area that still has generators to sell. Which costs more?

  • ||

    Not to mention in the whole scheme of 'the planet has a fever' zealotry, price gouging is how the market lets these people know they're engaged in risky behavior and/or that 'the planet has a fever'. Carbon tax the shit out of them and they'll happily drive SUVs and live feet from the coastline. Triple the price of gasoline when they're on E and trying to evade a hurricane and they'll either keep gasoline on hand, buy a more fuel efficient vehicle, or never come back.

  • Agammamon||

    . . . all readily available to disaster survivors at normal prices - about a two-week hike away if you're of average physical fitness.

    Heh. Stossel. a) That's not 'readily available' and b) you aren't doing a two-week hike without carrying two weeks worth of enough food to allow you to hike. That's a lot of weight. That means that a 'person of average fitness' will be dead 3 days into their walking evacuation.

  • Sometimes a Great Notion||

    An avg human can live for 30 days without food. Gandhi did 21 days. Water would be the issue. But if you're prepared you should have a water bottle with a filter to dip into streams and ponds as you hike. So a backpack full of food, a water bottle and a tent and your set for two weeks.

  • CDRSchafer||

    After Hurricane Harvey, Texas did not allow "price gouging" on gas up here in San Antonio. Because the refineries in Houston were damaged, we had a short-term gas shortage. So people decided to fill up their tanks and they sat in line for hours a day, even though it was clear the shortage would be quickly alleviated. If the price were allowed to rise, these idiots wouldn't have ran to the gas station and topped off their tanks constantly.

  • Tionico||

    When Harvey hit and took out those refineries around Houston I guessed fuel prices would rise where I live, 2000 miles away. I was right. Within TWO DAYS we saw twenty cents the gallon HIGHER prices.... then thirty.
    Yet NO ONE even mentioined price gouging.....
    Funny thing, that......

  • WillPaine||

    Jskids; well said; there is a higher cost to Friedman economics than money numbers; to most economic theories and/or applications, as well. Clear thinking analyzes the realities of economics in total, and you demonstrate such. Thx.

  • Rich||

    "When people hear 'price gouging' they think, oh, 'gouging'—this awful thing. But it really is kind of just another name for 'supply and demand,'" explains 17-year-old Annelise Kofod

    "'Supply and demand'?! That's even *more* awful!"

  • SuperChuck||

    If you are traveling and need to go pee, doesn't most of the gas station stores put the bathrooms in the back so you need to walk past all the food for sale!
    Plus it will be more expensive since it is impulse buys.

  • Tionico||

    Travelling south on I 5 from Oregon into northern California, had enough fuel to make partway to Redding from Grant's Pass..... so did not fuel up cause prices in GP were higher than back home. Needed fuel along the way, and learned aobut price gouging along that stretch. Fifty cents/gallon higher from Ashland all the way to Corning!!!! I learned about price gouging, the difference was far more than the simple cost of transporting the bulk fuel to that area. Now I always FILL in Grant's Pass, possibly Medford, as it is cheaper there than anywhere else from Salem to Corning. Fifty cents the gallon for thirty gallons is more than enough for fine supper.

    Supply and demand trained me to NEVER fuel along that stretch. Carry a jerry can if necessary.

    Two can play that game.

  • vek||

    That's the whole point... It causes people to act rationally. If you have the only filling station for XXX miles, why not make a higher margin? If you charge too much somebody else will eventually open a gas station. Etc. Economics doesn't always SEEM fair, but it does make perfect sense rationally, and ultimately provides the best possible service. If those little stations in between weren't charging more, they may not be able to stay in business at all...

  • Braunasaurus||

    Stossel just got these kids blacklisted from every major university by show their face. S.J.W.s assemble

  • SuperChuck||

    Maybe right, but does it really matter. They are free from crippling student loan debts.

    The brain chemistry change from being woken up will make them realize that they don't need a University Degree to become successful, they do not need political connections to become rich via ripping off the public, but they can instead do it with hard work and discipline!

  • Agammamon||

    Gougers don't deserve medals. Their reward comes from the money they make exploiting a profit opportunity.

  • Eric||

    Celebrating the cruel and brutal side of the free market = Not a wining ticket for a libertarian to run on.

  • Eric||

    Celebrating the cruel and brutal side of the free market = Not a wining ticket for a libertarian to run on.

  • D-Pizzle||

    What's worse, having to pay very high prices for the goods you need, or not being able to get the goods you need at all?

  • CDRSchafer||

    Yeah I'd much rather sit in a gas line for two hours rather than pay $7 a gallon for gas. I mean only lost two hours of my life and two hours of wages that amounted to more than I saved on the artificially cheap gas.

  • vek||

    HERETIC!!!

  • SuperChuck||

    Few people ever mention the gorgers during bad events. The people who buy too much! Too much batteries, water, etc so the store shelves run bare! Of course post storm, those same people want to just return the excess! How is that fair!?

  • SuperChuck||

    Market needs to decide prices. Imagine the government is giving away free generators in such amount that people are getting them and then later driving them out of the area to sell for pure profit!
    The government was just leaving the people hanging out to dry.
    No one was putting a gun to the peoples head, to make them buy. But of course, the government put a gun the the businessman's head trying to offer something for sale. See the hyper-crazy!

  • John B. Egan||

    I spent ten years working as a large loss property adjuster across our nation: Massive floods, large area fires, snowstorms, hurricanes, you name it. Most businesses that gouge do so 'after the danger has passed'. How are they putting themselves in danger by overcharging if the danger is past? That is patently absurd, but so typical of Stossel.

    Further, gouging is not reserved for areas of destruction, it also occurs in many other areas of our life... as we have just seen with 'pharma-bro' Shkreli and Epipen manufacturer Mylan... Please explain the 'horrible danger' these suffered allowing them the right to charge 600% more for a critical medicine, the Epipen and a jump from $13.50 a pill to $750 for a product that was no longer protected by patent?

  • ||

    Please explain the 'horrible danger' these suffered allowing them the right...

    Rights aren't "allowed", they are an inalienable part of being a human. You can ask whatever you want for your property, others are free to engage in trade with you or not. Otherwise please provide moral justification for using agents of the state to prevent any consensual transaction.

  • You're Kidding||

    My wife thinks hotels raising their rates during peak demand periods (holidays) is "unfair" and "there ought to be a law".

    But she also thinks she should be able to charge whatever she sees fit and, can get, for things we sell on eBay or garage sales, etc.

    There's no reasoning with her!

  • ||

    There's no reasoning with her!

    But you people are still married; now that takes some people skills on your side.

  • vek||

    Women... They have no logic hidden anywhere in their little heads... As the saying goes, women are lucky they have vaginas, otherwise there'd be a bounty on their heads!

  • WillPaine||

    This occurred to me as I read all comments here; historically, the value of an ounce of gold is equal three hundred loaves of bread. A measure of value, for what it's worth.

  • vek||

    It is actually crazy if you look at cost of living pegged against gold over even thousands of years... A lot of stuff has hardly changed at all in terms of "intrinsic" value.

  • wreckinball||

    Good article as usual from Stossel

    My question is why he's here at lack of Reason?

  • STRAMBOTIK||

    As usual, John Stossel confuses everything.
    Charging a high price is unobjectionable if the high price reflects high costs. A well designed "price-gouging" law would not punish the merchant in the example, since he made the decision to purchase, transport and sell the devices after the natural disaster had occurred, and the costs and business risk undertaken were greater than routine.
    Usually price gouging restrictions cover goods that were already in stock when the disaster struck. Such goods were bought at the same price and therefore entailed the same costs as buying them before and after the disaster. Consequently selling them at a higher price than usual right after the disaster, when demand is strong, generates a greater sales margin that does not reflect any investment or other effort on the merchant's part that is worthy of being rewarded.

  • Tionico||

    you don't seem to consider RE:PACEMENT COST when the desired goods are sold when need increases and supply decreases.
    I have a hardware store, normally stock three of them, hurricane comes through, no one has power. I sell the three at normal price to the first three who come through the door and want them. End of day I go home, mine is running out in the garage keeping my household running..... it begins to run slower, begins to clatter and clank, goes BANG and stops.

    Now YOU tell ME just how much that fourth generator I don't have down at my store is WORTH to me right now? How much food is in my freezer that WILL be destroyed? Ten times the value of the genny? What about my well pump that doesn't work, and I don't have enough water to run my household now I've sold off those generators today at what they sold for last week?

    You fail to understand basic economics. If those three buyers had PLANNED AHEAD and bought those gennies when they were easy to replace once sold, they'd not have to think about paying two, five, ten times what they "cost" after the 'cane hit.

  • vek||

    Yup. A smart guy will try to restock mid destruction too. Gouging allows him to fully and properly restock, since it is likely his costs will have risen mid disaster, hence getting these additional units to people faster.

  • Tionico||

    The excellent economist, Thomas Sowell, in his book Basic Economics, defines "price" as that which determines the distribution of scarce resources that have other uses..

    After Katrina, the generators were scarce resources IN THE AFFECTED AREA. Thus double what the "price" was well outside the affected area was what SHOULD have determined their distribution. As it is, stupid gummit uffishuls decided a better "price" was "free' to them, so they stole them, and they never reached those who NEEDED them and were willing to pay for them. (not to mention they also stole the man who was wise and wealthy enough to BUY them where he could and attempt to distribute them where they were desparately needed. ).

    FASCISM is government control of private means of production.. whether it is the dirty coppers who "controlled" private distribution, or enacting of laws against "pricing to market".
    Stupidpeople... socialists, all of them who would tell Charlie how to manage his private means of production.

  • Tionico||

    anyone else remember the chap, a decent entrepreneur, who rose to a need in the wake of some riots in the LA area some years back...... seems the destruction was so vast entire areas did not have potable water service. So, our hero takes his rattly old pickup truck, mounts up a 400 or so gallon stainless food grade water tank into the bed, fills it up with clean tap water from where he lives, paying the water company the going rate THERE< then drives to the area of destruction. For two dollars the gallon, he'd fill up anyone's container. He returned on a daily basis, supplying a basic need the government HAD been supplying, but no longer could/would.

  • Tionico||

    He was later charged with price gouging... they declared the two dollars the gallon charge was "excessive". Never mind the former source, the government, refused to deliver the pruduct at ANY price, and thousands were without that product they so desparately needed. In his defense he presented a gallon jug of drinking water which he had purchased at a chain grocery store in his own neighbourhood... priced at two dollars ninety eight for one gallon..... ninety eight cents above what HE had been charging. He then asked the court if they would go and charge those store managers with price gouging, as they were charging more than he did, and they were still 25 miiles away from where it was needed. If memory serves, he was convicted under some arcane code somewhere, sentence suspended...... but he was still "guilty" of a non-crime. Guess the city hooh hahs had to come down on SOMEONE creative and proactive enough to meet the need the city would not.....

  • Puspack||

    Nice information get more at https://www.puspack.net/

  • Puspack||

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online