As of this writing, late April of 2006, there has been much talk about price-gouging. The price of crude oil has risen up, and with it the price of gasoline. This has led to almost every American politican to make flustered comments about the dreadful rising price of gas, and how it is hurting working families, and all the usual news you get from politicians. Even George W Bush has joined the chorus of people who are denouncing "Price Gougers", as he did in this speech:
This gives me an excellent chance to do something that I don't often get the chance to do: criticize Bush from the right. At the same time as I am denouncing him, of course, I am also denouncing many other would-be populist politicians.
The term "price gouging" can be applied many ways. The usual application of the term is to the extreme run up of prices in an emergency. For example, raising the price of bottled water to 12 dollars a gallon right before a hurricane hits would be the usual definition of price-gouging. The run up in gas prices usually, which are due to long term market forces instead of a localized immediate emergency, and tend to be around 10-25 percent increases, are not what usually constitutes "price gouging".
So what so many people are denouncing as "price gouging", seems to be just a normal run up in the prices of a scarce commodity that is in high demand.I don't know what the term "price gouging" means in this case. It could be that oil industry profits are too high, but even if we were to suppose that the oil industry was replaced by nuns working solely from the goodness of their hearts, we are still dealing with a scarce commodity in high demand. I don't see how this "price gouging" is any different from the normal course of market economics, something that very few American politicans would come out openly against. What does this mean- that "market economics" is good as long as we get whatever we want at the price we want, but then when it stops fulfilling our desires, it is comparable to the forcible removal of body parts?
If politicians are going to talk about price gouging, they should talk about three things: whether or not oil companies are actually colluding in violation of United States anti-monopoly or anti-trust laws, all of which have been established and on the books since at least the time of Teddy Roosevelt. Perhaps politicians could also talk about what moral and legal responsibilities oil companies have when they extract crude oil, a commodity that is of limited amount, and would seem to naturally belong to the public domain. And, if there is a case that oil companies are actually hoarding oil in the event of an emergency, preventing people from being able to function in the middle of a crisis, that is actual price-gouging.
Without investigating these three avenues, the complaints about price gouging amount to nothing but complaining that the market system fails to provide for everyone exactly what they need, when they need it. As I have discussed some four years ago, there seems to be some confusion about whether market-based economies are being embraced for pragmatic or philosophical purposes. It is perhaps time that people clear up this confusion, unless they have nothing to do but to prattle on with hollow populist slogans.