Politicians are again warning us not to engage in price gouging. There will probably be some followup heartbreak stories by the MSM. The best argument against such laws appears in an article by David N. Laband that appeared in the aftermath of Hurricane Hugo in 1989. It is currently available on an AIDS BBS. Why it is listed on this web site has always been a mystery to me. It could be used as an argument against setting price ceilings on drugs.

To many, price gouging is unconscionable, especially when someone else profits at your expense. Indeed, on Saturday (two days after Hugo it), emergency legislation was passed making the charging of higher prices post-Hugo than pre-Hugo a crime, punishable by a fine of up to $200 and/or a 30-day jail term. Give the politicians credit for being politically astute. Give them all an F in economics. Government-mandated restrictions on price levels will slow the cleanup effort as much as another Hugo. High prices are the free market's mechanism for ensuring that economic resources flow to their most highly valued uses. On the demand side, high prices guarantee that scarce goods are allocated to those buyers who place the highest value on them.

Update: The comments are open for any personal stories of price gouging. We always need new material for class.

Update 2: Craig wants a definition of price gouging. In Florida price gouging may be defined as charging an unconscionable price. The Florida statutes define an unconscionable price as follows:

Sec. 501.160 (1)(b) It is prima facie evidence that a price is unconscionable if:
2. The amount charged grossly exceeds the average price at which the same or similar commodity was readily obtainable in the trade area during the 30 days immediately prior to a declaration of a state of emergency, and the increase in the amount charged is not attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or national or international market trends

In other words, if the higher price generates economic profits it is price gouging.