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Free Liberal: Coordinating towards higher values

Free Liberal

Coordinating towards higher values

Why It's OK to Price Gouge

by Paul Jacob

Hold on to your hat, but, hey: it's OK to "price gouge." Still got your hat? Good. I'm not trying to provoke anger. I prefer thought.

The idea isn't that scandalously provocative, anyway. It's using the word "gouge" to describe charging prices that reflect reality that's REALLY scandalous.

People complain when a disaster causes price hikes -- prices of a good like gas. After Hurricane Katrina, we saw both an abrupt decline in supply AND increase in demand as consumers rushed to fill up their tanks sooner than usual. All this pushes prices upward. If you don't let the prices rise, you get long lines at the gas pump--and painful shortages like we saw in the '70s.

Public officials walk a tightrope about this. On the one hand, they say, "Yes, we know why prices are rising." But then they warn against "taking advantage" of the situation to raise prices "too high."

But what counts as too high? If ten dollars a gallon isn't competitive, what happens when a station tries to charge that? People go to the station down the block charging three dollars a gallon. For most people, "Too high" just means "a price I REALLY don't like." But prices reflect realities. And the reality is we've been dealt a horrible disaster.

After such a catastrophe, we need charity AND markets. Gas prices will improve faster if producers are allowed to deal with the situation as best they can. When things are this tough, the last thing we should do is make it harder to get back to normal.

This is Common Sense. I'm Paul Jacob.

Common Sense is published by Americans for Limited Government. Their website can be visited at

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