Does fighting price increases caused by supply-demand forces stop the free market from working and worsen our future problems? In other words, does prosecuting price gougers during gas shortages hurt us in the long run? I’m going to take a potentially-unpopular position here for the sake of argument and as a thought starter. Price gouging sounds like a real crime – sellers taking advantage of buyers who have serious needs and no recourse – but isn’t that just the free market at work? By making laws against sudden, demand-induced price increases aren’t we artificially controlling the price and removing people’s incentives to change their behavior for the better? During gas shortages people panic and hoard supplies, but wouldn’t high prices make people think of more effective ways to deal with the crisis before it happens the next time? The good news is that many people seem to be getting the message: fossil fuels won’t last forever, and we need alternatives now, or as soon as possible.
Evidence says we aren’t dealing with current and future energy and population issues very well. I wrote in an earlier item in this blog about how clueless people seemed in the face of a gas shortage, and how the media failed to suggest simple measures to reduce fuel consumption in its coverage of the shortage (link). Perhaps people would plan more thoughtfully if they learned to expect doubling or tripling of gas prices during a shortage. Some would argue that the high prices would cause suppliers to go to greater lengths to bring in fuel. In the short term people would plan and prepare better for shortages, but in the long term they might do as my daughter has, choosing to live in places and ways that would minimize the impact of gas shortages in the future. I am happy to say I am hearing people talking about such things more and more often lately.
Society can’t tolerate antisocial behavior, but is raising prices to the level people are willing to pay really antisocial? Our survival instincts protect us from each other as well as externally-imposed threats, and it is natural for us to take group action against members of the species who attack or harm others. In doing so we place the good of the group above the good of the individual, which is a natural choice that protects us as a species. Plenty of examples show that we don’t always do this in our own best interest, however, and in fact we codify such impulses into tradition and law in ways that sometimes works against us. Price controls are a simple and straight-forward example that contradicts or modifies the American concept of the free market, and can thereby reduce or block motivations (like preparing for gas shortages) that could be important to us in the future. I suppose it is only human that some people who loudly proclaim the greatness of the free market are the same people who turn around and make laws to prosecute what is essentially the free market in action.
Establishing important balances is a key to human success. We frequently need to find a balance between the good of the individual and the good of the group, and between the good of people today and the good of people in the future. We all need to learn about and carefully consider the challenges we expect in the near and distant future, think of ways we can meet the challenges, and communicate with each other (and especially our government representatives) about what is needed. That is our duty, as thinking beings, to ourselves, our families, our descendants, and life on the planet in general.
As always, I welcome your comments.