Hurricane Gales of Moral Sanctimony

News media generally refrain from explicit moral judgments (or pretend that they do). That is unless it is a moral judgment about someone making profits. Then the "live and let live" agnosticism of descriptive reporting is replaced by an odd and unquestioned orthodoxy.

This from Brendan I. Koerner of MSN Slate's "Explainer" column:

Hurricane Charley has reportedly brought out the worst in some merchants, as the Florida attorney general's office has been inundated with complaints about price gouging. Among the travesties cited are a $10 bag of ice in Orlando, $3 gallons of gas, and $2,000 power generators. At what point does a little legal—albeit morally suspect—profiteering turn into illegal price gouging?

I rarely read the phrase "morally suspect" in any column anywhere, but there it is. I single out Koerner's column because it captures the dominant mode of reporting. (It is a piece about the way the disaster has been handled in the media.) This, then, is the essence of immorality in an age dominated by moral relativism: Selling a product for the price it will command.

It seems that Florida law prohibits vendors from charging:

...an "unconscionable price" for their wares during an emergency. The attorney general is responsible for deciding what constitutes an unconscionable price, using prices over 30 days prior to the crisis as a barometer of what's fair market value.

Another word chalked full of moral indignation: "unconscionable."

One of the early puzzles in economic thought was the water-diamond paradox. Undeniably, water is more valuable and more essential to human beings than are diamonds, yet diamonds command a higher price. Why? The answer is that to purchase your very first cup of water in a month you *would* be willing to pay more than you would pay for any diamond in the world, but for the millionth cup of water in a month, you wouldn't be willing to pay much at all. (You'd be bloated by then. Hell, I can't even drink the 8 cups a day the doctors recommend.)

It is not in the least surprising to students who have had even a week of undergraduate economics that in a time of scarcity, prices rise. This serves important functions. If bags of ice cost 10 bucks, or better yet, 100 bucks, then anybody who has a way to make ice starts making ice and bringing it to the disaster area. This insures that much needed commodities make their way to areas that face scarcities. There is strong evidence that this actually happens in times of disaster: Price increases stimulate the supply of needed goods to needy areas.

What happens when we decide that price increases are "immoral"? Goods don't get there. So fewer people end up with ice, generators, gas, or food. It's true, of course, that the few that end up with the goods pay less for them, but this only benefits the lucky and connected few at the expense of the unlucky many.

And this is moral?

Yes, it would be nice if merchants refused to "take advantage" of their neighbors by charging high prices for goods in demand. It would be nice if we could count on public compassion, exclusively, to assist the needy in times of disaster. But compassion alone doesn't always work. Moreover, allowing both market forces and compassion to function only serves to augment whatever would have been accomplished by compassion alone. What would happen if we used the moral logic of this peculiar "anti-profit" ethos in other settings? Here are a few examples:

After the L.A. earthquake, contractors repaired the infrastructure with astounding quickness. The city was back on its feet much sooner than predicted. It was accomplished because contractors were paid hefty bonuses to supply needed services and supply them quickly. Prices rose because demand rose. Was this immoral?

Let's use a more pedestrian example. Your firm has an unexpected equipment failure that causes important work to be lost. They need you to come in after hours and they offer you triple overtime and a bonus to get the job done. In other words, demand for your labor has gone up because of a natural disaster. Do you accept their offer or do you decline it because it is immoral to price gouge?

You have a rare stamp. One day all other stamps of the same type vanish in a fire. Your stamp becomes incredibly valuable. Do you refuse to sell it because to do so is to price gouge?

Ah, say the anti-profit types. Human suffering is at stake in the hurricane example. That changes everything, they say. But does it? Isn't it all the more important to increase the quantity supplied of essential goods when people have desperate needs for these goods? And aren't the consequences of *restricting* the flow of these goods even more dire when people are desperate?

As an extreme example, consider the famine of 1958-61 in China. Many poor agricultural policies contributed to the famine. But one was a deep distrust of the suppliers of food. In order to keep food affordable for the population, the central government manipulated prices and wages for farmers. (Can't have profiteering, right?) The massive increase in food production that would have resulted from price increases did not occur. For this and other reasons, thirty to forty million people starved to death. In times of crisis, persistent intervention with price mechanisms can have horrific consequences.

I do not mean to argue against charity in times of disaster. But the glib moral certainty that treats price increases as prima facie evidence of immorality is not only peculiar, but dangerous. It seems to me that this kind of impulsive judgmentalisim is driven as much by resentment of someone ese's gain, as it is by concern for the predicaments of the needy. If concern for the needy were the issue, analysts would be compelled to think about which policies actually help the needy, whereas the base envy and resentment of anyone who makes a profit leads to no such evenhandedness.

The last time I checked, resentment and envy had not been proferred as a basis for moral judgements in any of the world's major religions or philosophies.

(Except, of course... in the high church of latter-day media sanctimony.)

-Philip Babcock