What’s Wrong With Hiking Pricing during Crisis Periods?
The ongoing crisis has given us hard-hitting scenarios questioning our morals at their core. Reports of people hoarding things from tissue papers to sanitizers, with the hope of selling them at higher prices, the questions before us beg answers — is it wrong to hoard-to-sell during such times? What’s the issue with raising prices to make a profit during a crisis?
Price gouging is when a product’s price goes way beyond what is considered reasonable or fair.
Hoard-to-sell is a form of price gouging. Before we question price gouging, let us dig into a deeper question — what is fairness?
Remember the time when you felt something was unfair? Why did you feel so? Where did the feeling originate?
Research suggests that kids have a fundamental sense of fairness. So, it can be said that we inherit this feeling associated with justice by birth. Likewise, we get this feeling of injustice when someone gets something that we feel they don’t deserve.
Life, as we know it, is unfair. History is replete with examples of good people suffering and bad people living a great life. I profoundly remember when this uncomfortable reality hit me while reading on Hitler’s treatment of Jews. Sadly, this unfairness subdued even in death — Hitler’s suicide with a bullet shot seemed graceful before the torturous fate of those millions of Jews. Someone who mercilessly murdered people for the sake of his ideology dying with just a bullet — that felt horrendous.
How is this related to price-gouging? Because it feels unfair.
This work is inspired by Prof. Michael Sandel’s book, Justice. I highly recommend this book to everyone interested in knowing the philosophies around justice and what it truly means to be just.
In his book, Prof. Sandel calls a just society as one that maximises welfare, respects freedom and promotes virtue. Going by that, price gouging succinctly belongs to an unjust society.
In essense, price gouging is a flagrant abuse of freedom, neither maximising welfare nor promoting any virtue.
For some economists, price gouging is a natural consequence of the sudden change in the supply and demand interaction.
Why Price Gouging Isn’t Wrong
In free markets, the prices are a result of supply and demand. Buyers are free to choose to purchase from any seller and vice-versa — the seller is free to sell to anyone of his choice.
Price gouging is essentially adjusting the price to a sudden demand shock.
A handful of economists argue that there is nothing wrong with price gouging. If anything, price gouging ensures people in dire need of a good are the ones to get it — leading to an efficient allocation of resources.
Why Price Gouging is Wrong
The fight is between wants and needs. Free markets are all in for profiting from someone’s wants. When someone tries to profit from others needs, that is when we feel unjust about the whole situation.
Price gouging is a blatant expression of greed. Promoting a vice, such as greed, leads to an unjust society. Trying to take advantage of someone’s unfortunate circumstances — that is something a good society would never promote.
Let’s get to the economics aspect — are markets truly free during a period of emergency? In a free market, the buyers and sellers trade based on their will. They have a choice of saying NO to an offer. During crisis periods, saying NO isn’t an option, especially to daily necessities — the markets are not free.
Prof. Sandel mentions
What’s important to notice, however, is the debate about price-gouging laws is not simply about welfare and freedom. It is also about virtue — about cultivating the attitudes and dispositions, the qualities of character, on which a good society depends.
Our morals and ethics are consequences of our upbringing — both at home and society. Questioning our feelings — what we feel and why we feel — helps us steer our morals. This isn’t only about price-gouging, this is about what leads to people doing all that — is it just economic reasons or is there something about human nature that pushes us towards such vices?
