I’m a little behind in my readings in The Freeman, (the Foundation for Economic Education‘s excellent magazine), so if you read it, you may already have already seen this little piece by David J. Hebert. If not I highly recommend it. It’s called Ice and Economics and although it is not specific to this question, I think it expresses in a wonderful nutshell exactly why price gouging is good.
“If there is a disaster, we would want people to use less of [a resource] so that everyone else can still use some.”
Of course! Why would we want panic and hours waiting on lines?
“With firmly established and enforced property rights, not only does the owner not have to worry about someone else taking his things, but he also doesn’t have to rush out to gather the resources as quickly as he can. A situation where there are no property rights is susceptible to what is called the ‘tragedy of the commons,’ where the resource gets depleted too quickly and never has a chance to replenish.”
Hours waiting on lines anyone? The station running out before you make it there?
Yes, the gas lines may be gone here in NJ, but there is always a good reason to learn about economics or they’ll be back.
“Meanwhile, as the price of ice on the ponds rose, the people of Boston gained the information that it would bring a higher return in the Bahamas, thus they used less themselves and sold the ice to the Bahamians.”
There’s more to the article of course so be sure to read the whole thing.