The attitude people have towards price gouging in general is very strange. I never understood it until I read this:
http://www.overcomingbias.com/2009/09/the-dark-side-of-coope...>For example, in big disasters like hurricanes, certain goods like gas, wood, water, or food become especially valuable. While natural selfish reactions lead to higher prices for these key items, humans clearly evolved to see this behavior as uncooperative; we resist such price rises, and want to punish those who allow them.
>Perhaps this made sense for our distant ancestors, but today it is counter-productive. If these goods are not allocated by price, they will instead be allocated by standing in lines, personal connections, etc., processes that are consistently worse at giving goods to those who value them the most, and do worse at creating incentives to prepare for such scenarios.
EDIT: I'm getting a lot of replies with about the same argument so I'll just make a response here.
Uber and gas are not essential for survival. You can make the argument for water, but even that isn't necessarily better distributed with fixed prices. E.g. the recent water crisis in Toledo where people cleared out the shelves in minutes buying bottles of water they didn't need.
The biggest reason to allow price gouging is that it incentivizes increasing the supply. People come into the city bringing bottles of water to sell, people sell their personal supply. If price gouging was legal, people could make money storing supplies of resources to sell off during criseses. Supply and demand would eventually lower the price to what it costs to store resources for rare events. This kind of economic emergency preparedness should be encouraged as much as possible.
>For example, in big disasters like hurricanes, certain goods like gas, wood, water, or food become especially valuable. While natural selfish reactions lead to higher prices for these key items, humans clearly evolved to see this behavior as uncooperative; we resist such price rises, and want to punish those who allow them.
>Perhaps this made sense for our distant ancestors, but today it is counter-productive. If these goods are not allocated by price, they will instead be allocated by standing in lines, personal connections, etc., processes that are consistently worse at giving goods to those who value them the most, and do worse at creating incentives to prepare for such scenarios.
EDIT: I'm getting a lot of replies with about the same argument so I'll just make a response here.
Uber and gas are not essential for survival. You can make the argument for water, but even that isn't necessarily better distributed with fixed prices. E.g. the recent water crisis in Toledo where people cleared out the shelves in minutes buying bottles of water they didn't need.
The biggest reason to allow price gouging is that it incentivizes increasing the supply. People come into the city bringing bottles of water to sell, people sell their personal supply. If price gouging was legal, people could make money storing supplies of resources to sell off during criseses. Supply and demand would eventually lower the price to what it costs to store resources for rare events. This kind of economic emergency preparedness should be encouraged as much as possible.