A Study on the Anti-price gouging Law in America

Abstract

The pre-modern economics was focused on the normative thoughts, but modern economics is focused on the positive thoughts. But the pre-modern ‘just price’ concept still influences contemporary economic policies. An example is American anti-gouging law. The law is a kind of price ceiling on the necessaries in emergency such as Hurricane. There have been heated debates on the justice and efficiency of the law.<BR> Supporters of the law insist that price gouging is immoral and should be prohibited by the law in order to protect consumers from the exploitation by the greedy sellers. But opponents insist that the law does not fulfill its purpose, because many consumers can not buy the necessaries and the allocation of them is inefficient under the law.<BR> This paper analyzes the merits and demerits of the anti-gouging law in terms of medieval ‘just price’ and modern price control theory. My conclusion is that the validity of the law depends on the price elasticity of the supply, income inequality, and the ratio of spending on the item.