The Ethics of Price Gouging

THE ETHICS OF PRICE GOUGING

Matt Zwolinski

Abstract: Price gouging occurs when, in the wake of an emergency, sellers of a certain necessary goods sharply raise their prices beyond the level needed to cover increased costs. Most people think that price gouging is immoral, and most states have laws rendering the practice a civil or criminal offense. The purpose of this paper is to explore some of the philosophic issues surrounding price gouging, and to argue that the common moral condemnation of it is largely mistaken. I will make this argument in three steps, by rebutting three widely held beliefs about the ethics of price gouging: I ) that laws prohibiting price gouging are morally justified, 2) that price gouging is morally impermissible behavior, even if it ought not be illegal, and 3) that price gouging reflects poorly on the moral character of those who engage in it, even if the act itself is not morally impermissible.

1. Introduction

I

n 1996, Hurricane Eran struck North Carolina, leaving over a million people in the Raleigh-Durham area without power. Without any way of refrigerating food, infant formula, or insulin, and without any idea of when power would be restored, people were desperate for ice, but existing supplies quickly sold out. Four young men from Goldsboro, which was not significantly affected by the storm, rented refrigerated trucks, bought 500 bags of ice for $1.70 per bag, and drove to Raleigh. The price they charged for the ice was $12 per bag—more than seven times what they paid for it. ' This kind of behavior is often referred to as "price gouging." Many states. North Carolina included, prohibit it by law. And even when it is not legally prohibited, it is generally thought to be exploitative and immoral.^ The purpose of this paper is to explore the philosophic issues surrounding price gouging, and to argue that the common moral condemnation of it is largely mistaken. I will make this argument in three steps, by rebutting three

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