Good news, friends! We already have Jimmy Stewart. He’s right here among us. Only his name is “market pricing.”
Free enterprise — sometimes called capitalism — is a wonderful thing in normal times because during every non-coercive transaction, the buyer would rather have the thing he’s buying than the money, and the seller would rather have the money. Each freely entered-upon transaction increases global well-being.
But capitalism is especially useful in a crisis, when there is market disruption. When times turn dark, capitalism is, more than ever, your friend. Let’s say stores run out of toilet paper or hand sanitizer or diesel fuel because of panic buying during the age of COVID-19, and no one can find these items in stores. Why people are punching each other over the Charmin while leaving the Robitussin and Tylenol alone is a mystery, but that is of no moment. What matters is that toilet paper is suddenly more valuable simply because demand has surged. That means people are bidding up the price. Or they would be, if the stores allowed this. If Costco quadrupled the price of whatever item is selling out, there wouldn’t be any shortages of anything. Market pricing would restore normal functioning.
Say that after a blizzard there’s a doctor whose old shovel just broke and who treats lots of elderly patients who might slip and fall and break bones on the sidewalk outside his office. He can’t have a shovel for any price because an ordinary homeowner who already has a serviceable shovel and whose house is not going to be approached by anyone anyway in the next few days happened to get to the store before the doctor and bought a backup he didn’t really need just in case.
Market pricing is how we allocate goods according to greatest need. It’s how we maintain civilization. When we allow market pricing to work its wonders, it forces people to be civic-minded, forces us to be that guy in It’s a Wonderful Life who decides he can get by on $20 for now, instead of taking out the $300 in his bank account. When we interfere with market pricing, it’s like turning away the public-spirited Jimmy Stewart and declaring that it’s every man for himself.
Springsteen used to sell tickets to his concerts for very low prices because he wanted ordinary working men and women to be able to afford them. What actually happened: Ticket resellers bought up all the tickets. So a ticket with a face value of $30 went for $100, except $70 of that went to a third party. At some point it occurred to Springsteen that if tickets to his shows were selling for $100, it didn’t make a lot of sense for $70 of that to go to a middleman who not only didn’t write “Born to Run,” he didn’t even write “Workin’ on a Dream.” Years ago, Springsteen dropped his “friend of the working man” pricing policy, which is why the last time I went to one of his concerts the face value of the ticket was $350. Is Springsteen guilty of “price gouging” for denying ticket resellers the opportunity to make gigantic profits from his work and artistry? Were those resellers guilty of “price gouging” for selling those tickets for what people were willing to pay?
When retailers don’t charge market rates, middlemen naturally step in to ensure proper pricing. Would we rather he store the stuff in his basement and not share it with the community, which is what ordinary Costco hoarders are selfishly and mindlessly doing as a group? Why shrug at hoarding but be cross with the anti-hoarder, the reseller? Value is, as always, highly contingent on time and place, as you would know if you’ve ever bought a happy-hour drink, a Tuesday night ticket to the movies, or an off-peak train ticket.
Denying that a thing is worth what another person is willing to pay for it is like denying any other scientific law, like gravity.
What happens if the merchant doesn’t “price gouge” is that his critical items may simply disappear instantly and the person who really needs that snow shovel, needs it so badly that he must have it right now, can’t have it. This is a needless, possibly lethal, cruelty that free movement of prices smoothly corrects