Experiments and Complexity
ISIS and the Arts

Price Gouging

By Jonathan B. Wight

What’s not to like about market pricing--allocating resources by willingness and ability to pay? It eliminates waiting lines and shortages, and in theory results in more output available than under price controls.

There’s plenty not to like, if the conditions and background circumstances of trade matter as issues of justice. People care about what is “right” given the circumstances. Such moral judgments often clash with neoclassical arguments of efficiency and freedom—moral sentiments be damned.

The irony is brought forth wonderfully by satirist Andy Borowitz in the New Yorker, who reports that:

“A criminal lawyer representing Turing Pharmaceuticals chief Martin Shkreli has informed his client that he is raising his hourly legal fees by five thousand per cent, the lawyer has confirmed.

“Minutes after Shkreli’s arrest on charges of securities fraud, the attorney, Harland Dorrinson, announced that he was hiking his fees from twelve hundred dollars an hour to sixty thousand dollars.

“Shkreli, who reportedly received the news about the price hike while he was being fingerprinted, cried foul and accused his attorney of ‘outrageous and inhumane price gouging. This is the behavior of a sociopath,’ Shkreli was heard screaming.”

The New York Times also reports today that Adele as taken steps to prevent ticket scalping at her sold out worldwide concert tour. Scalpers help consumers who are too lazy or too busy to stand in line. By cutting these people out of the loop, Adele is proclaiming that loyalty is more important than how much money you have to wave around to get to the front of the line.

In this age of hyper-inequality, the argument for non-pecuniary values as determinants of exchange may gain traction. Such non-pecuniary values often involve discrimination (allocation by favoritism toward the “right” kind of people—in Adele’s case toward fans who prove their loyalty be staking out ticket offices). I am in favor of this provided it is not mandated by the government, and provided it does not rely on characteristics that are out-of-bounds to today’s sensibilities (race, gender, sexual orientation, and so on).

It does make us recall why we like the market, which in theory (not in practice) treats everyone who has a dollar as a moral equal, no questions asked.

For a theoretical treatment, see Chapter 7: The Moral Limits to Markets.


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