Gordon Gecko said “Greed is good.” When it comes to private enterprise, Congress couldn’t disagree more. Congress has passed an anti-gouging law that makes it a crime to “increase prices unreasonably,” or charge an amount that “represents a gross disparity” over what was charged over the past 30 days.
Incidentally, if you’re a gas station owner, how do you know if your prices are unreasonable? How do you know if it’s a gross disparity? Of course you wouldn’t unless people stopped buying from you or they arrested you. But never mind any of that, laws are meant to be vague and incomprehensible, much like politicians. What’s legal today may not be tomorrow. Such is our existence in the new banana republic. I’m not so young that I can remember a time when market forces governed these things. If you charged too much, no one would buy from you. If everyone charged too much, someone new would start selling, undercutting the “unreasonable” profits.
Back to greed. Gordon Gecko, the fictional boss from Wall Street, was making a point often missed by the masses, but captured by Ayn Rand. Without profits, human ingenuity dies. Congress has now launched us on the bitter path of socialism in the misguided belief that it knows best. They have tied “Big Oil’s” hands by restricting refining capacity through regulation and outright prohibition. They have allowed the arrogance of California’s emissions standards to set refining requirements across the nation (the irony here is that this is the one place Congress has authority to act, but refuses). And now, they have cut the throats of gas station owners.
What is price gouging and why is it bad? I remember the blackout of 2003. It was August and pizza was about all you could eat as the pizza shops burned through their inventory (gas ovens still worked) before it went off. And batteries and water were at a premium. My wife was escorting scores of elderly people up and down the stairs in our apartment complex, using a tiny flashlight. Other people needed batteries for their radios. Some people needed batteries for medical devices.
So how dare Mr. Chang at the bodega charge $5 dollars for a $2 battery?!? Because if he didn’t, they would fly off the shelf, and then the next person wouldn’t even have a chance. Think of what happens in a crisis. People panic. People plan. People hoard. All of this happens while Mr. Chang cannot resupply his inventory. What he has in the store is all that he has access to until the crisis is over.
If Mr. Chang doesn’t raise his price, sure he’ll sell out quickly as Mr. Smith buys 2 batteries for the radio, 2 for the flashlight and 2 more “just in case.” But what about Mrs. Carlisle who needs two batteries for her husband’s IV? If she doesn’t get there in time, there’s nothing left.
On the other hand, if Mr. Chang raises the prices, Mr. Smith might realize that the radio is more important, and he can live without the flashlight, not to mention without the “just in case.” Mrs. Carlisle, of course, would be happier spending the $5 on the batteries than the $6,000 on the funeral. This is what is known as the law of supply and demand. For nearly 4 centuries, it has efficiently allocated goods and capital to where they are needed most. That’s why we call it capitalism. It’s a harsh law, but it has always been tempered by humanity’s compassion.
I’m sorry to be so patronizing, but Congress clearly doesn’t get it. They’re lost in their idiocy, trying to “do something” before people realize how useless and pointless they are and how we’d all be so much better off if they were all incinerated.