In 2013 there was a severe shortage of firearms and ammunition in the USA as the Obama administration maneuvered to tighten controls in the wake of the Sandy Hook shooting. People began selling used firearms for more than they had cost new just months before. Reasonably-priced ammunition was scooped up by many who then turned right around and sold it for twice the price or even more. Although those who wanted guns and ammo were far from being victims of disaster, the profiteers and price-gougers of the 2013 panic were derided all the same--no matter whether they were wholesalers, retailers, or private individuals.
Or consider hurricane Katrina in 2005. John Shepperson heard people were without power along the gulf. He borrowed money and bought 19 generators, took them 600 miles away to Mississippi, and offered them for sale (for double what he paid). Shepperson was arrested and the generators were confiscated. The hospitals, commercial freezers, and homes that might have benefited from the generators remained without power that day.
This is wrong!
All this negative language (e.g. "gougers," "profiteers" as though there were something wrong with selling something to make a profit, "unconscionable," "taking advantage," "predatory") does a disservice to people who are bringing relief to those in need. Even those who don't like the motives and attitudes of price-gougers must see the logic that supports their actions.
I believe that just as there is a law of gravity, there is a law of supply and demand. The free-market prices of things depend on the supply (something costs more when it's scarce than when it's redundant) and demand (I'll pay more for something I really want than for something I'd just kind of like). As people shop around and dicker and compare features and prices, goods and services that get sold do so at a market price that is somewhere in between what the seller wishes he could have got for it and what the buyer wishes he could have paid for it.
Of course, no manufacturer is going to survive by selling goods at a loss. If the cost of labor or materials goes up, a manufacturer will either have to get a higher price for his goods, or he'll stop manufacturing them entirely. A manufacturer may wish to make a lot of profit for some item, but if another manufacturer sells it for less, the first must lower his price--or stop making those goods. By the same token, buyers aren't crazy. Paying more for one item means having less to pay for the next, and buyers have to decide which goods and services are most important. And as long as enough other buyers are willing to pay $1 for some good, good luck finding anyone willing to sell it for a quarter.
Somehow people have the idea that the markup must be "reasonable" (in their evaluation) or it is somehow morally wrong. From my perspective, this makes as much sense as saying it is unreasonable for gravity to be of such force that I break a leg when jumping off a ladder. The "natural" consequence of an unreasonably high price should be a lack of buyers, not arrest and confiscation.
So I defend gougers because I truly believe in freedom in general and free markets in particular. I believe buyers should be free to buy anything legal for whatever a seller is willing to ask, and I believe sellers should be free to sell anything legal for whatever buyers are willing to pay. Far from seeing a moral fault in allowing Shepperson to sell his generators for twice what I paid, I believe this free market system is good and right. It's one of our most basic American freedoms.
Nobody should impose price controls or artificially benefit one side of an economic transaction at the expense of the other. The only people who have a right to judge a price reasonable or not are sellers and buyers--and then the consequence should be a voluntary decision whether to sell or buy. Anyone who wants to start invoking business licenses and similar administrative red tape in a disaster situation as an argument against freedom(!) in a disaster scenario--those are the people I detest. They would rather suffering people continue to suffer than find relief at the hands of an unregulated profiteer. If we don't have the freedom to adjust prices in response to a hurricane or earthquake, then when should we ever be free to adjust prices? Is it more "moral" to adjust prices based on the cost of materials or labor?
I believe in capitalism. People are motivated by what they believe is in their own best interests. When someone is motivated by greed to drive a truckload of bottled water or cans of food to an area hard-hit by disaster, they are voluntarily providing a needed service at no taxpayer expense. Without any FEMA planning or action, so-called gougers are willing to buy needed goods, transport them, and distribute them in the disaster zone. Without soliciting funds from their neighbors, so-called gougers are willing to take out loans to buy gasoline-powered generators they may not be able to sell, and take those generators to places they reckon people will be wanting them. If FEMA or the Red Cross are providing those goods instead, then people will simply ignore anyone trying to charge $20 a case for water or $1,500 for a generator. After all, nobody is forced to pay $20 for a case of water simply because someone else has it for sale.
The way I see it, when someone is motivated by greed to bring relief goods to people who are desperate for those very goods, things are working efficiently. Those people who are most desperate will tend to get the goods, because they're willing to pay more than someone who already has a backup supply at home. (Those who are in similar need but don't have cash are no worse off than if the "gougers" had never come.) And those who are willing to take the initiative to get supplies to the needy are the very ones rewarded. If a perpper is one of the lucky ones to be at the right place at the right time to get relief goods for free, chances are those goods will join his stockpiles--in behavior we call "hoarding." But if those goods come at a high price, the prepper may well decide instead to rely on his existing supplies, keeping those goods available for someone else who may not be so prepared.
People who say that those who bought ammunition at Walmart for resale are saying in essence that Walmart should not be free to sell to willing buyers or that some people should not be free to buy ammunition, or both. There are those who believe that some humans are more qualified to make decisions like who may buy or sell what than those who own the goods or hold the cash, but I'm not one of them.
I've been puzzled at preppers who are angry with profiteers, sympathizing with the disaster victim whom they see as "a guy just trying to survive." What puzzles me is that they view that same disaster victim as a "looter" when he's walking up to their door after a disaster, looking for help. While only a few would respond violently to a disaster victim just for approaching their doorway, most preppers I've heard from on this matter are full of nothing but disdain for those who have not prepared. Ask in your typical online prepper forum whether we should prepare to help our neighbors and friends after a disaster, and the response will make you question any declarations of charity for those same neighbors and friends when confronted by a profiteer with a truckload of generators or water.
Not only do I believe that free markets are not immoral, I say they are "good." Here are some social benefits brought by price gougers and profiteers:
- They help prevent vital supplies from being squandered. People consume goods one way if the goods are free or cheap, and another way if they are expensive.
- They help prevent hoarding of vital supplies. When goods are expensive, people are less likely to acquire more just to stockpile, and more likely to sell some of their stockpiles. (Note that people who object to profiteering also object to hoarding. They argue that it isn't "fair" that some people have plenty while others are in want. But by reducing hoarding, profiteers help make a more equitable distribution of goods.)
- As profiteers compete for "easy money," the typical result is an oversupply of vital supplies, leading to lower prices--in other words, a rapid return to normalcy.
- To the extent that those most desperate for vital supplies are willing to pay the most for them, profiteers improve the efficiency of getting supplies to where they are most needed.
- Corruption is reduced and freedom is maximized when no third party is empowered to decide who can sell what to whom.