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Amid the COVID-19 pandemic, many have witnessed an economic phenomenon that is synonymous with times crisis. That is the practice known as price gouging. This practice has the proclivity to ignite a universal cascade of outrage and indignation. Superficially such a reaction seems understandable. Considering by definition it is a sharp increase in the price of a good that is in high demand [1]. On the surface, it would seem morally base to take advantage of an emergency situation such as a hurricane. The general consensus would extend to the outbreak of an emergent pathogen such as COVID-19.

 

There is a general consensus on pricing gouging is morally objectionable. However, there isn’t much agreement on what constitutes price gouging. Approximately two-thirds of all states have some sort of price gouging law on the books [2]. It appears as if most states have a different interpretation of what price gouging entails. For instance, the state of Alabama provides clear and concise guidelines for defining price gouging :

Ala. Code §§ 8-31-1 thru 8-31-6

Prohibits “unconscionable prices” for sale or rental of any commodities or rental facilities during a declared state of emergency. A price is prima facie “unconscionable” if it exceeds 25% of the average price during the last 30 days immediately prior to the declared emergency and that increase is not attributable to reasonable costs. [3]

 

In contrast, the state of Texas provides a vague description of what is considered price gouging. Per Texas state law: “exorbitant or excessive” prices in connection with sale or lease of necessities during a declared disaster” would be illegal [4]. What defines “exorbitant” prices? I would not suggest that there should be federal standardization of price gouging laws. That should be left up to the states. At the very least be clear about the parameters defining the criminal act. Too much ambiguity can make enforcement problematic.

I currently reside in the state of Arizona. Arizona does not presently have any price gouging laws enacted. It is speculated that the reason being is that natural disasters are a rare occurrence [5]. Being a mountainous and landlocked state we are insulated from tornadoes and hurricanes. We have the good fortune of not experiencing the seismic activity that afflicts California. The prospect of a natural emergence putting a strain on the supply of essential goods is relatively foreign to Arizona. The one exception being the event of the 2003  Kinder Morgan pipeline burst. Which resulted in fuel shortages [6]. The significant increase in fuel prices passed along to the consumer was viewed as exorbitant [7]. Many residents at the time viewed it as vendors supplying fuel were engaging in some form of price gouging.

Seventeen years later some are now calling for corrective action to price gouging in Arizona[8]. Many vendors have been reacting to the COVID-19 outbreak with higher retail prices on essential goods. These higher prices are due to an increase in demand and the stockpiling of commodities such as toilet paper.

Personally, I am very incredulous when it comes to price gouging laws from an economic standpoint. Being a proponent of states rights’, Arizona can in my view pass price gouging laws. As states should cater their laws to what best suits their economy and culture providing it does not violate the Constitutional. Due to such measures not being pertinent in Arizona prior to COVID-19 is why such laws did not previously exist. I do know of at least one person who has referred to Arizona as “backward” for not having such laws in place. This is a misguided opinion.

As I mentioned earlier Arizona is relatively isolated from circumstances that would make price gouging more prevalent. This isn’t like hurricane-prone Florida or South Carolina not having price gouging laws in place. There is also the implied assumption that more laws and regulations are a net good for society. States and municipalities with fewer laws are unevolved. A law that is  either pointless, ineffective, or unjust is not universally positive due to the fact is merely another constraint.

 

I grew up in New England where there are still a litany of archaic laws and ordinances still on the books. What is colloquially known as “blue laws”. Laws that are no longer culturally or economically relevant. Frequently prohibit actions that most likely victimless crimes. While some history buffs find these laws quaint and harmless, I disagree. Even if these laws are never enforced, philosophically I oppose them. What is the purpose of laws? Depending on your answer to that question, it will shape your perception of what laws are just and reasonable. I feel that most blue laws only reinforce my rejection of legal positivism. The law should not determine what right, but it should protect what’s right. This perspective is codified in our Bill of Rights. Nowhere did I see any guarantee of economic equity or immunity from making bad decisions. The Bill of Rights were  established on the grounds of natural rights. Suppose to government decree and guarantee of positive rights.

 

In my next blog post, I will discuss why price gouging laws are economically illiterate. If lawmakers here in Arizona are persuaded by public outrage, I can only hope that they are reasonable. Provide firm guidelines that define what constitutes price gouging. That they opt for justifiable limitations. Unlike, Connecticut which cites any increase in prices during a  time of an emergency as illegal [9].

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