Is Price Gouging Evil?

What's the best way to deal with shortages after a disaster? Would you believe three Nobel Prize winning economists? All of whom say, "Gouging is good!" And, the best way to get supplies to the people who need the most!

Source: John Kessler YouTube channel.

Transcript:

Stossel: Is price gouging evil?

Everyone agrees that if a seller greedily doubles prices after, say, a hurricane, that's not only bad, it's immoral! People say that when gas prices are raised.

Woman: They're taking advantage of us.

Woman: I think that we're being ripped off.

Bill O'Reilly: We are being hosed here, and the oil fat cats are laughing up the dollar.

Matt Lauer: Gouging at its best.

Stossel: But what exactly is gouging? People say it's raising prices too much, but who exactly gets to decide what's too much?

Man: For people to take advantage of those in need violates every Biblical standard of morals that I'm aware of.

Stossel: Mississippi's Attorney General announced a crackdown on gougers after Hurricane Katrina.

Woman: Massive destruction everywhere.

Stossel: One gouger who was arrested was John Sheperson. He and his family live in Kentucky. They watched news reports about Katrina, and learned people desperately needed things.

Man: My wife just got out of the hospital, and she's very sick, and we need a generator.

Stossel: John thought he could help, but make some money too. So he bought 19 generators, and he and his family then rented a U-Haul and drove it 600 miles to this part of Mississippi, which had no power at the time.

Woman: 5 million people in this region are without power.

Stossel: John offered to sell his generators for twice what he paid for them, and people were eager to buy.

John: People were excited. We had a product they needed.

Stossel: But instead, police confiscated his generators, and John was locked up in this jail for price gouging.

John: They arrested me, and I just could not believe it that I was being arrested.

Stossel: Authorities held him four days, and his generators are still in police custody.

John: Then nobody got any use out of them. They were useless.

Stossel: So did the public benefit? The real question is: What's the best way to deal with shortages after a disaster?

Woman: Anybody? What do we need? Come on, guys!

Generators! Food. Food!

Man: Anytime there's a natural disaster, a hurricane, an earthquake, the price of things that people desperately wanna have: batteries, flashlights, generators, water, milk, they go up, or they disappear.

Stossel: Economist Russ Robins points out that after the disaster, if sellers don't raise prices, supplies vanish. Anxious buyers line up and often buy more than they need, just in case. Those not at the front of the line may get nothing.

Russ Roberts: More people wanna buy it than there is stuff available. That? What do you do? How do you solve that problem? How do you find out who should get those scarce items?

President Nixon: A major energy crisis...

Stossel: During the last energy crisis, the politicians solution was to cap prices, but that didn't fix the problem. It made it worse.

Roberts: It was a disaster. It led to long lines, and you couldn't get gasoline.

Stossel: That's why today's high oil profits, says Roberts, are a good thing because they're a huge incentive for oil companies to look for more oil! You want them to make these monster profits?

Roberts: I do. Higher prices are hard on consumers. Hard on consumers today, good for consumers tomorrow when those high prices give energy companies the incentive to go discover and refine more energy in the future.

Stossel: Which is why what the politicians call gouging, is actually good! Now, I know you don't believe this.

Woman: That's absurd! That's absurd!

Man: Prove it! I mean..huh...prove it!

I don't know what Mr. Stossel is thinking!

Stossel: Okay, you probably won't believe me, or Economist Roberts, but would you believe three Nobel Prize winning economists? All of whom say, "Gouging is good!" And, the best way to get supplies to the people who need the most!

Gary Becker: … fairest and best way to do that.

Vernon Smith: … and that's a good thing.

Milton Friedman: … the gougers deserve a medal.

Stossel: Because the higher prices bring in the goods that people desperately need.

Russ Roberts: If we don't let the price rise, there aren't going to be enough generators to go around. We let the price rise, to give people incentive to bring them in.

John: Somebody needs to bring these products to people when there are disasters and emergencies, and this is gonna be one person that's not gonna be there that they took out to the equation.

Stossel: Economists we talked to say, "He's a hero." You're the one who's immoral, for saying he can't sell generators to people, who want, willingly, to pay for them."

Mississippi Attorney General: Look, my job is to enforce the law. Our laws state that you cannot increase your profits, once a State of Emergency has been declared.

Russ Roberts: People want to live in a world where love is what motivates people to help others. And love does that. But there isn't enough love to go around. Love for strangers isn't gonna motivate enough people to get in their trucks, load them up with generators, and take them down to help people who are cold and hungry.