Praise for Price-Gouging

John H. Cochrane's article discusses the controversial topic of price gouging, particularly in the context of natural disasters and pandemics. He argues that price gouging, which occurs when prices rise sharply due to increased demand or decreased supply, should be praised rather than condemned. Cochrane distinguishes price gouging from monopolistic practices, asserting that it operates within competitive markets and serves to allocate scarce resources to those who need them most. He contends that higher prices can incentivize suppliers to bring in more goods and help manage demand effectively. Cochrane criticizes government efforts to regulate price gouging, suggesting that such laws can exacerbate shortages and discourage inventory holding. He emphasizes that while the cultural perception of price gouging is negative, it plays a crucial role in economic efficiency. Cochrane also highlights the importance of allowing market mechanisms to function without interference, arguing that moral disapproval of price gouging often leads to misguided policies that ultimately harm consumers. He concludes that rather than imposing price controls, governments should consider direct financial assistance to those affected by high prices.

- Price gouging is seen as a mechanism to allocate scarce resources efficiently during crises.

- Government regulations against price gouging can worsen shortages and reduce supply.

- Higher prices can incentivize suppliers to increase inventory and manage demand.

- Cultural and moral disapproval of price gouging often leads to ineffective policies.

- Direct financial assistance may be a better alternative to price controls.