Colinxy: The Myth of Price Gouging

Why the Accusation Is Economically Illiterate, Morally Backwards, and Politically Convenient

Few economic concepts generate as much outrage, and as little understanding, as “price gouging.” The term itself is propaganda: a moral accusation disguised as an economic description. It implies theft, greed, and predation. It suggests that businesses raise prices during crises because they are wicked, not because reality has changed.

But like most activist vocabulary, “price gouging” collapses the moment you examine it. It is not an economic principle. It is a political slogan. And it survives only because it is useful to politicians, unions, and bureaucrats — not because it makes any sense.

Let’s dismantle the myth.

“Price Gouging” Is Just Supply and Demand Under Stress

When a cyclone hits, or a pandemic spread, or a supply chain collapses, the relationship between supply and demand changes instantly.

• Supply drops
• Demand spikes
• Prices rise

This is not greed. This is arithmetic.

If petrol stations, supermarkets, or hardware stores kept prices artificially low during a crisis, the result would not be fairness; it would be instant shortages.

The higher price performs three essential functions:

1. It rations scarce goods: People buy only what they truly need.
2. It signals suppliers to bring more stock: Higher prices attract more supply.
3. It prevents hoarding: Without price increases, the first ten people empty the shelves.

In other words: Price increases during crises prevent chaos.

The alternative is Venezuela: empty shelves, rationing, and black markets.

The Real “Gouging” Happens When Prices Are Kept Artificially Low

When governments impose anti–price gouging laws, they create:

• shortages
• queues
• rationing
• black markets
• corruption
• panic buying

This is not hypothetical. It happens every time.

During Hurricane Katrina, anti–price gouging laws caused:

• petrol shortages
• hotel shortages
• bottled water shortages

People slept in cars because hotels were forbidden from raising prices.

During COVID‑19, anti–price gouging laws caused:

• mask shortages
• sanitiser shortages
• toilet paper shortages

People hoarded because prices were not allowed to rise.

The irony is delicious: Anti–price gouging laws create the very suffering they claim to prevent.

“Price Gouging” Is a Moral Accusation With No Moral Logic

Activists claim that raising prices during crises is immoral because “people need these goods.”

But morality cuts both ways.

If a shopkeeper keeps prices low during a crisis:

• the rich buy everything
• the poor get nothing
• the shelves empty instantly
• the crisis worsens

If prices rise:

• goods remain available
• hoarding stops
• supply increases
• the poor can still buy essentials

Which outcome is more moral?

The activist position is emotionally satisfying but morally incoherent.

The Myth Exists Because It Is Politically Useful

Politicians love the phrase “price gouging” because it allows them to:

• blame businesses for crises
• distract from their own failures
• posture as protectors of the poor
• impose more regulation
• expand state power

It is the same political trick used with:

• “greedy landlords”
• “greedy supermarkets”
• “greedy oil companies”

When prices rise, politicians never blame:

• inflationary monetary policy
• supply restrictions
• zoning laws
• regulatory burdens
• taxation
• government‑created scarcity

They blame the people who actually supply goods.

It’s theatre — and the public pays for the tickets.

The Myth Is Economically Illiterate

The accusation of “price gouging” assumes that:

• businesses can raise prices at will
• consumers have no alternatives
• competition disappears
• supply magically stays constant
• demand magically stays constant

None of this is true.

If a business raises prices too high:

• customers go elsewhere
• competitors undercut them
• substitutes appear
• suppliers shift
• markets adjust

The only time “price gouging” can occur is when government restricts competition.

In other words: If price gouging exists, it is because the State created the conditions for it.

The Myth Has a Dark History: It Was Used to Justify Rationing and Control

During wartime, governments used “anti–price gouging” rhetoric to justify:

• ration books
• price controls
• confiscation of goods
• central planning
• criminalisation of private trade

The result was always the same:

• shortages
• corruption
• black markets
• inefficiency
• suffering

Meanwhile, the politically connected always got what they needed.

The rhetoric was moral. The purpose was control. The effect was misery.

The Reality: High Prices Save Lives

This is the part activists cannot accept.

When a crisis hits:

• high prices attract more supply
• high prices prevent hoarding
• high prices keep goods available
• high prices allocate resources efficiently
• high prices reduce panic

High prices are not exploitation. High prices are information.

They tell the world: “Bring more of this here, now.”

And the world responds.

Conclusion: Price Gouging Is a Myth — Scarcity Is Real

The accusation of “price gouging” is a political weapon, not an economic argument. It survives because it is emotionally satisfying, not because it is true.

The reality is simple:

• Prices rise because scarcity is real.
• Prices rise because demand changes.
• Prices rise because supply changes.
• Prices rise because markets work.

And when governments interfere, the poor suffer most.

The myth of price gouging is comforting. The truth is uncomfortable. But the truth is also liberating:

Prices are not moral statements. They are signals, and in a crisis, they save lives.

Colinxy regularly blogs at No Minister, This article was sourced HERE