As a result of the COVID-19 pandemic, there’s been a strong effort to curtail price gouging on items such as hand sanitizer and medical face masks.
What doesn’t get said enough, however, is that forcibly restricting prices from rising above a certain threshold will not in itself influence the market conditions that drive prices up.
Price gouging encourages competition by pressuring manufacturers and distributors to increase production, which over time, would actually drive down costs. Price controls during a time of crisis, however, do nothing to address the shortage problem.
When we experience a large decrease in supply, or an increase in scarcity, the price mechanism helps us know what to do next.
Prices are the moral rationing agents of market exchange.
The invisible hand of the market reaches out to help people in a disaster, but anti-gouging laws cut it off at the wrist.
Join our professors Peter Jaworski, Howard Baetjer, and Matt Zwolinski as they take you into a world of thought experiments that will literally blow your mind as they expand your normal cognitive processes and your worldview. Then take on the thought-provoking questions after each video. Trust us, after completing this course nothing but nothing will […]