Tuesday, December 20, 2005
Markets work by letting people know when their prices do not match those offered by competitiors in the market, as Horwitz describes:
The owner of the store also reports that over the weekend when his price was at $3.80, his sales dropped significantly. He sold 1358 gallons on 9/2, 738 gallons on 9/3, and 429 gallons on 9/4. This was also Labor Day weekend, when lots of car travel happens. His sales didn't reach 1000 gallons again until 9/9. So the result of his supposed "price gouging?" A drop in sales! Gasp!! Demand curves slope downward after all! As the owner says in his defense "why would I purposely gouge somebody and watch my sales drop?"The AG's office replies that consumers "had to pay the retail price" without explaining where the consumer bought the gallons they weren't buying from this retailer. Horwitz responds that "the AG's office treats consumers as passive victims, even though the evidence clearly shows they made active choices in the face of high prices."
Gouging laws, in short, are unable to comprehend the workings of markets.