This article discusses the price ceiling and it's damage to economics. We can learn that price rationing is the best way to allocate alternative resources to their most efficient use.
Interesting points:
In the article, the author raises three puzzles against price gouging laws:
(1)The laws put the force of government behind efforts to prevent people from entering into agreement or transactions that law makes find objectable. In other words, the price gouging laws confiscate people's freedom to agree at a higher price.
(2)Price gouging laws become more expansive in scope and more frequently invoked.
The author also in this article points out that some people claim that price gouging is immoral is driven by the emotional responses to the price increases.
arguments for and against
Price gouging laws revolved around three ideas: maximizing welfare, respecting freedom, and promoting virtue.
(1) Issues about economic welfare: price gouging laws prevent resources from being used in their most efficient way.(People are not incentivized to supply.)
(2)freedom: the laws stop people from agreeing on prices higher than the price ceiling
(3)virtue issues: the laws hurt a certain group of people in society. Besides, since merchants now have little incentive to provide goods, at a certain point people cannot get what they want even at a price higher than the price set under the law, thus exacerbating the virtue issue.
Question:
Government can do other things rather than price ceiling to make the situation better. For example, subsidize merchants so that they can lower the prices?
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