As I pointed out in my interview, by allowing price gouging, we get,
to some extent, the best of both worlds. We get the traditional
merchants like Wal-Mart, who worry about reputation, stocking certain
supplies in advance and not raising prices. We also get the fringe,
one-time suppliers, bringing in more supplies in response to the higher
prices they can charge.
I found this quote from Thaler, at the 15:09 point, economically illiterate:
A time of crisis is a time for all of us to pitch in; it's not a time for all of us to grab.
Remember that he said this in the context of
opposition to price gouging. But what price gouging does, as Don Boudreaux
points out,
is cause people far from the crisis spot to pitch in by temporarily
foregoing buying the water, plywood, etc. that, due to price gouging,
are priced higher even outside the directly affected area.
P.S. If you're inclined to dis NPR Marketplace, then
listen to the whole thing. It goes only about 4 minutes. They do a nice
job, calling on two economists and one philosopher, of laying out the
beneficial economics of price-gouging before going to Thaler to give an
alternate, if badly thought out, counterpoint. My one criticism is that
the host, Kai Ryssdal, leads by saying that "the free market is
cold-blooded, heartless." He never says why, assuming, as he probably
knows he can, that most of his listeners will agree with him."