Heavy Lifting - thoughts and web finds by an economist
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Wednesday, August 18, 2004

On Price Gouging...

I always bet my undergraduate students an entire letter grade if they can find a published economics textbook with a proper definition of price gouging. It is a safe bet, because THERE IS NO DEFINITION OF PRICE GOUGING!!!

Perhaps the "price is too high" or "taking advantage of a situation" is what people mean by the term, but as economists we know that means nothing. Is it true or not that supply curves are upward sloping? Is it true or not that demand curves are downward sloping? In an emergency, price not only rations the market, but it provides significant information.

In the case of Florida, in the aftermath of Charley, if you are sitting on a bunch of bottled water, a higher price in Florida might motivate you to move the water, say, from Dallas to Tampa. Anti-gougers want the price to remain the same and the owner of bottled water in Dallas to move the water to Florida out of the goodness of her heart...you can eat profits, you can't eat goodness.

Nonetheless, public officials - from the Florida governor to the Florida attorney general - have decried rising prices in the aftermath of the storm.

Divison of Labour has some great posts dealing with this red herring of an issue. I point you towards their good work.

Also, I thank them for the complement on their page:
ASIDE: Speaking of heavy lifting, we've added Craig Depken's heavy lifting blog to the blogroll. Highly recommended, especially his recent post on the plan to rip off Arlington TX taxpayers to build a new football stadium for the Cowboys.

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