The Moral Case for Price “Gouging”

by | Mar 5, 2015 | Philosophy

There is a knee-jerk response to the notion of an individual raising the price of his property during a storm that immediately evokes hostility from most people. Why?

In a previous article, I demonstrated that price gouging laws actually cause shortages during storms and only serve to add mile long lines, empty gas stations, and gas station bouncers to the list of problems experienced by victims of storms or other natural disasters.

However, this was an economic argument that presupposes that people value happiness and would therefore demand political conditions or rights that would result in freedom and prosperity. Believe it or not, this premise is not axiomatic and in fact, as I will show, the opposite premise leads to price “gouging” laws in the first place.

Before I get to my explanation, let’s take the economic argument a step further. As George Reisman describes in detail in his book “Capitalism”, price controls by virtue of their fundamental violation of property rights are tantamount to de facto socialism and the resulting shortages (described in detail in my last post) are the basis for the economic chaos, stagnation, and misery unleashed by every socialist regime in history. Price controls by definition force individuals to relinquish their property or labor at a lower price than they would agree to voluntarily. Under price controls therefore there is literally no actual ownership of property (or at best nominal ownership) since an individual by definition can not voluntarily choose how to dispose of it. The resulting situation is chaos and economic stagnation as logic and history show us.

A government can only force price controls to the extent it is willing to unleash massive violence on its own people to force them to relinquish their property or labor for nothing (total slavery) or at prices to which they would not otherwise voluntarily submit. This is the case in the most vicious socialist states in history such as Russia, China, Cuba, North Korea, among others. Fascism is equivalent to socialism in principle but generally the state allows a facade of private property and intervenes as it deems necessary but this is only a matter of degree. In the United States today and in Europe, price controls are imposed less frequently since the governments of these countries to this point have not been willing to persecute their people on the scale of the other countries. However, in principle, private property is not considered an absolute right and is frequently violated even in these relatively less socialist countries (price “gouging” laws, minimum wage laws, anti-trust laws, tariffs, etc.). It is not a coincidence, that these relatively more free countries are prosperous and the relatively less free countries are mired in stagnation, poverty, and misery.

So, the economic argument made earlier and above has been known and understood for over 100 years. The effects of price gouging laws and the like have been understood for over 200 years at least. If the economic argument against the various types of price controls have been understood why is it that not only the average person not educated in economics so easily accepts these laws but even educated politicians and intellectuals accept them? Is economic ignorance so widespread or is there a more fundamental reason?

While the basic laws of economics are not widely understood even at the most basic level there is a more profound reason. There is a knee-jerk response to the notion of an individual raising the price of his property during a storm that immediately evokes hostility from most people. “How could someone do that” or “it’s not fair” is a typical response. Personally, I would not be hostile to someone raising their price in a disaster – I would expect and welcome it. Why?

The answer lies in a fundamental conflict in moral philosophy: the supposed morality of altruism versus the morality of rational self-interest or egoism. This conflict has been identified and analysed best by Ayn Rand and other Objectivist philosophers in my view which can be accessed through my links.

Put simply, the dominant ethic of our time is the morality of altruism. Altruism is not defined as benevolence or good will although it is commonly mistaken as such. Altruism is the doctrine of self-sacrifice. It is the idea that you should give up something more than you gain. The historical concept of sacrifice can be traced back even before the rise of Christianity and is beyond the scope of this post. Suffice to say that religion generally (not just Christianity but virtually all major religions) adopted the notion that sacrifice to god is virtuous. The socialists merely replaced god with state and more recently the ecology movement has replaced god and state with nature or Mother Earth. The Nazi’s (national socialists) added race to the list. These various movements disagree as to the recipient of the sacrifice but do not differ in believing that sacrifice is the essence of virtue.

What does this have to do with price “gouging” laws, minimum wage laws, price controls, and socialism in general? Everything. According to altruism it would be considered unethical to raise your price during a disaster. Would raising your price be the “Christian” thing to do? Of course not. Would Jesus raise his price during a disaster? Of course not. This would be “evil, greedy, profit seeking.” Marx might even say this is another example of capitalist “exploitation.” These ethical theories are at the base of all government intervention in the economy. Therefore, the most rational economic argument carries little weight if people believe it is immoral.

Many intellectuals accept the basic premise of altruism but recognizing that it is “impractical” have then argued that the most people will still benefit from freedom since given the economic argument it is for the most people’s good to avoid shortages, long lines, misery, etc. Many on the right would still accept some variant of this argument as an attempt to reconcile freedom and profit seeking with the altruistic ethic.

When today’s liberals argue for more goverment intervention in the economy what is the response from the conservatives on the right? Well, given the conservatives religious philosophy (altruism) they are trapped in a contradiction and unable to defend freedom against the charge that businessman are “greedy, profit seekers”, etc. According to the conservatives’ own religious philosophy the liberals are correct. This is why despite the Republican’s rhetoric upholding free markets they are responsible for some of the worst expansions of government power and do nothing in practice to fundamentally stop it.

So then why not question the altruist ethic? Would if sacrifice is not virtuous? Would if it could be shown that rational self-interest is the good and that it is actually virtuous to be selfish and evil to sacrifice? Shouldn’t individuals be left alone to think freely and make their own choices? Shouldn’t two individuals be left free to trade to the mutual benefit of both parties? If so then shouldn’t the government protect private property instead of routinely violating it? Why would any individual wish to join in a society where they are not free to keep the fruits of their labor and to dispose of their property as they wish?

Capitalism, freedom and profit seeking are incompatible with the doctrine of altruism. So despite all the economic arguments, it is the ethics of altruism that must be challenged if freedom, individual rights, and capitalism are to be defended and saved.

Doug Reich blogs at the The Rational Capitalist with commentary, analysis, and links upholding reason, individualism, and capitalism.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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