Saturday, March 01, 2008

In Praise of Price Gouging

Matt Zwolinski has an interesting new paper on the ethics of price gouging. I'm certainly suspicious of blanket bans on allegedly 'exploitative' (but mutually beneficial) exchange. As Zwolinski argues (p.34):
Existing laws against price gouging either fail to provide clear guidance to sellers or fail to take account of all the morally significant reasons which could underlie a price increase, and it is difficult to see how laws could be reformed to avoid this dilemma. Furthermore, any legal prohibition of price gouging will create disincentives for individuals to engage in economic activity which helps those made vulnerable by emergencies. Because laws which prohibit price gouging thus harm vulnerable buyers and are unfair or unclear to sellers, they are immoral and should be repealed.

He further argues that price gouging is not impermissible per se, nor evidence of bad character, though particular instances of it might be. Whether it is permissible depends on whether there are legitimate reasons (i.e. besides greed) for raised prices -- whether this will increase market efficiency in allocating scarce goods, incentivize increased supply, etc. And whether the behaviour indicates bad character will presumably depend on whether the actor appreciates these impartial reasons, or is solely acting from greed.

5 comments:

  1. quite a bit of legitimate economic activity is based on 'greed'. Some might argue moral people generally don't make good participatants in a market.

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  2. Well, self-sacrificing behaviour may be unhelpful, but even the most competitive wealth-seekers had better abide by some moral constraints (e.g. not to defraud or coerce others, etc.).

    Now, I'd agree that seeking wealth (if that's what you mean by 'greed') is, in itself, a good thing, or at least not bad. But I would define 'greed' as an excessive concern for one's own wealth, and so a deficiency in one's concern for how this may impact others, which I think is unquestionably a vice. It doesn't come up in everyday market transactions (excepting fraud, etc.), since there's no reason to think that one's own wealth-seeking is going to harm others. But if you think of a so-called "easy rescue case", say where a ship's captain happens across a drowning swimmer, it would be an immoral exercise of greed to only rescue them on condition that they sign over all their worldly assets.

    Now, in cases of selling scarce goods to disaster victims, it may be that one is acting from similarly callous/greedy motives, but in fact there are good efficiency reasons to objectively justify the price hikes (which the agent neither knows nor cares about). In such a case, I'd say the act is permissible, but the agent vicious.

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  3. Hmmm....
    One could say price gouging - whenever greed is a component of the decision making - is a sign of bad character because it is a sign that you have in your character the bad attribute of 'greed' (regardless of any other reason).

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  4. But it isn't a sign of "excessive" wealth-seeking, unless it is crowding out all other reasons. If the price gouger is partly acting from a recognition that higher prices may be expected to allocate the scarce good more efficiently (and wouldn't do it otherwise), then that seems perfectly decent of them.

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  5. If greed is by definition "excessive concern for one's own wealth" for it to be excessive that marginal increase in that concern must be morally an issue. Surely that excludes the possibility of "perfectly" decent.
    Of course they don't have to be perfectly evil.

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