06 August 2007

measuring the morality of "price gouging"

Skip Oliva makes a fascinating point about the measurement of price gouging:
That in any given economic exchange, the party trading cash holds the legal and moral high ground over the party trading a good or service.
as a thought experiment, try to imagine any exchange in the form of barter that can be seen as anticompetitive. i wasn't able to, but i'm sure that bartering a ton of turnips for life-saving diabetes drugs would surely raise some hackles.

Antitrust regulators obsess over short-term prices. They deem a price “anticompetitive” when they think it should have been lower. The seller is liable for trading a good at anticompetitive prices. But why isn’t the buyer equally liable? If the government sets the competitive price of a good at x and a seller trades that good at x+1, both the buyer and seller undermine the competitive price level.

The rejoinder to this is that the buyer is “forced” to pay the anticompetitive price because the seller controls the supply of an item desired by the buyer. But the reverse is also true. The buyer controls a supply of an item desired by the seller—cash. The seller lacks the ability to obtain cash from anyone except those cash-holders willing to trade for the seller’s item.

via The Liberal Order.

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