Is price-gouging immoral?

Gregory Mankiw, an economics professor at Harvard, wrote this ringing economic defense of ticket scalping and price-gouging generally. In his essay, Prof Mankiw revisits the laws of supply and demand from his Econ 101 course to explain why he was more than happy to pay $5,000 (or maybe even $7,500) for two (or three) tickets to see the hit Broadway musical “Hamilton.” (Although the original title of his essay in print is “$2,500: a fair price for ‘Hamilton’,” Prof. Mankiw himself clarifies in the seventh paragraph of his piece that he paid “$2,500 a ticket,” so we assume that he also bought a ticket for his wife and maybe even for his teenage son, who were with him during his recent Columbus Day weekend visit to NYC.) In reply, Michael Hiltzik, a columnist for the L.A. Times, wrote this moralizing rebuttal to Prof Mankiw, arguing that price-gouging of non-luxury, essential products (like bottled water after a storm has hit) is immoral. (But who decides what is “essential”?) For our part, we agree with the likes of Mankiw that the price of something is just the product of supply and demand forces, but we agree with Hiltzik that $7,500 for three tickets for a Broadway musical is an obscene and offensive price. Prof Mankiw must have other significant sources of income (from private consulting work or textbook royalties, for example), in addition to his university professor salary.

Image result for hamilton

Supply and demand.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
This entry was posted in Economics, Law, Philosophy. Bookmark the permalink.

4 Responses to Is price-gouging immoral?

  1. Craig says:

    It’s not really up to us to decide what “rich” people decide to spend their money on, but when supply-and-demand takes over everything, all that money sloshing around does seem to un-democratize the American experience. Take baseball — major league games have become very expensive, World Series tickets ridiculous. I had World Series tix for $75 each back in 1992 (which unfortunately I never got to use — damn you Atlanta!) Now, standing room tickets in Cleveland are $2,200 each. But that isn’t gouging. Baseball is not an essential, certainly not a commodity, but it does make life enjoyable. Gouging is when a commodity usually available to all becomes temporarily scarce. Supply-and-demand is when a product or service keeps seeking the price that maximizes profits — gouging in slow-motion, if you will.

  2. Luanne says:

    I was really turned off when Starbucks overcharged people right during 911!

    • that’s an excellent example illustrating the tension between ethics and economics

      • Luanne says:

        And it seemed like a no-brainer to me. I couldn’t even imagine. If I remember right there was backlash and they reversed their policy. I wonder if others who live there still remember that and if that particular store is still in business.

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