In Defense of Price Gouging!

In the aftermath of Hurricane Harvey there has been quite a bit of pissing and moaning about what many feel is an atrocity larger than the hurricane itself. Liberals, politicians and other economically challenged people who do not understand the basic laws of economics are all crying foul. I would like to make a plea in defense of price gouging!

Basic Economics

When supply is low and demand is high prices go up. When supply is high and demand is low, prices go down. This is basic economics. Right now, we have a high demand for water and a low supply of it in certain areas of Texas. What did everyone expect would happen? Of course water prices would go up.

But here is the beauty of the free market. In a very short amount of time people will fill this demand and the price of water will go back down. But those who are economically challenged would like the government to impose price regulations and "anti-gouging laws." This completely screws up the market making a product in low supply cheap by forcing price controls on those who supply the product. So there is no incentive for those to go out of their way to rush this product to those who need it most.

So, what you get is an empty pallet with a price tag of $5 per case instead of a full pallet with a price of $50 a case. Which do you think would better serve people? I would rather have access to water, even at $50 a case. Which by the way is only about $2.00 per bottle. Anyone who has ever been to a sporting event or public event knows that is a bargain compared to what you will pay at these events.

Why This Is Not a Concern

But as they say in the infomercials, wait, there’s more. “price gouging” could never last for the same reason that there has never been a true monopoly. The reason is “competition.” In just a very short time someone like me would see a gap in the market. I would load my truck and arrive selling cases of water for $40 a case. But, it doesn’t end there. Seeing as how there is still a huge gap in the price of water, someone else would load a truck and start selling water at $30 a case and it would continue until the supply reached a level where water was once again selling at $10 a case (or whatever the market price was at the time.)

Only a complete moron would think that there would ever be a time where someone could corner the market and sell water for $50 a case, and that’s where the price of water would stay. What you are witnessing is nothing more than supply and demand in action, so stop crying and do something productive. Get a truck, load it with cases of water and make a few bucks while at the same time helping your fellow man. As Gordon Gekko once said, "greed...for lack of a better word, is good" he was right!