Price Gouging and Market Price

I’ve wondered about price gouging and read a few articles and arguments for permitting it. Most of these have been from Austrians. The arguments typically focus upon the extrinsic consequences of (il)legalizing price gouging in times of crisis. That is they are entirely consequentialist in their reasoning. They have no addressed the intrinsic injustice that is at least proposed.

Price gouging is an increase in price that goes beyond right reason. That is the limit of what I’m certain of. However, this doesn’t get of very far and we need to determine the standard of right reason.

Austrians, from what I’ve seen, typically suppose that the market price is the just price. Along this line, whatever the market determines the price to be is in accord with right reason. However, this seems absurd for two reasons.

The market price is the common estimation of the price based upon the activity of the participants in the market. Now justice is definite and objective, while the market price is indefinite and subjective, that is it is an estimate of many and it is based on their perception of value.

Moreover, the market price as being an estimation of market participants is bound by all that is in human error. Humans act and judge irrationally and this can well take place in market valuation as well. The market price cannot be the just price, because the just price is the objective standard against which subjective judgments are determined to be right or wrong. If the market price is the just price, then the market cannot error which is absurd.

However, in a crisis it does seem plausible that some increase to prices may be warranted given that certain things are objectively more valuable in a crisis.

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