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Pricing Gouging: Is it Justifiable? Research Paper

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Updated: Nov 21st, 2019

Essay Proposal

Calamities leave terrible and remarkable damages on people who are afflicted by them. Hurricane Sandy was particularly devastating to northeast residents in New Jersey. Apart from the conspicuous financial and personal damages left behind by disastrous emergencies, they also provoked political and bad economic grandstanding.

Any person who follows such grandstanding wonders whether it is fair for businesses- from those dealing with consumables to gas stations- to spontaneously hike their prices to earn windfall profits at the advantage of desperation of disaster-afflicted customers. Many will perhaps say no to the query especially those caught at the middle of the hurricane sandy, as price gouging not only seems illegal but also unethical.

Chris Christie, the New Jersey governor, was concerned that not all people in New Jersey held the above position. He warned that price gouging in the event of a disaster like hurricane sandy was illegal and one that attracted heavy penalties to culprits. Similar to the warnings issued by Chris Christie, Schneiderman, a New York based Antony, lamented that people need to look out for one another during emergencies.

Conceptualization of these lamentations creates an impression that price gouging is morally unethical. Unfortunately, this may not be the position for Keynesian economists. While some people like Chris Christie and Schneiderman may see price gouging in event of a disaster as a wrong profiteering endeavor, to these groups of economists, sudden price hike is merely one of the ways of realizing balance between demand and supply. Hence, price gouging is not wrong since it is simply an application of laws of demand and supply.

Considering the opposing positions of price gouging, this paper proposes to question whether indeed price gouging is right or wrong and whether it is just. Particular focus of the research paper will be dedicated to introspection of the perception of the business owners on the purpose for existence of their businesses especially on aspects of profit making endeavors showing how such perceptions relate to price gouging.

In the effort to deliver a research based on scholarly evidence, discussion of price gouging is based on various scholarly views of people on what constitutes justice. The essay will first lay fundamental grounds of research by discussing first what is right or wrong from the context of Sandel’s work: Justice: What’s the right thing to do? The essay will then proceed to discuss Libertarianism view of price gouging followed by Utilitarianism view of the same. Finally, Kantian perspectives on price gouging will be considered.

Annotated bibliography

Sandel, Michael. Justice: What’s the right thing to do?. New York: Farrar, Straus and Giroux, 2009. Print.

This book lays down Sandel’s political philosophy. The author attempts to engage with difficult political philosophical issues in an open and honest manner. He argues that justice, as a chief determinant of what is rights or wrong to do is concerned with values, which are central to politics of states coupled with the law.

His discussion of justice is limited to pluralistic societies forming western civilizations. He does this through a balanced discussion of a three-facet approach to justice. These facets are communitarian, utilitarian, and libertarian dimensions of justice. Sandel does not contend with the arguments of these alternative justice theories. Rather, he engages criticism and commentaries whenever appropriate.

Criticism is the main methodology used to provide a balanced view of justice from the three theories. Sandel begins by outlining Jeremy Bentham’s utilitarianism theory followed by its criticism in the context of the refinements to the theory as postulated by John Stuart.

He then proceeds to scrutinize Robert Nozick’s Libertarian’s approach to justice followed by Immanual Kant’s categorical imperatives. Upon discussing the work of John Rawl and the concept of telos, which was raised by Aristotle, he begins to bring into lime light his own views on justice.

He maintains that, opposed to the view of justice as being autonomous, as Rawlsians and Kantians would suggest, it has a purpose and goals. Now, Sandel makes it clear that justice serves to limit certain actions of individual in the society: a view adopted by communitarians.

Wolff, Jonathan. “Libertarianism, utility, and economic competition.” Virginal Law Journal 92.1(2006): 1605-1623. Print.

Jonathan Wolff discusses the characteristics of liberaltarianism coupled with foundation that anchors it. He argues that libertarianism is anchored on the ideas of “minimal state, restricted to narrow functions of protecting citizens from each other (and for non citizens), and providing for the enforcement of private contracts” (Wolff 1605).

To him, this argument implies that libertarians presume that freedom from the state rules is accompanied by economic institution driven by perspectives of pure capitalism, which includes strong rights of private property.

This presumption helps to permit free competition among all potential goods and service producers. The article then proceeds to discuss two forms of libertarianism: deontological and consequential libertarianism. Wolff relates these types of libertarianism with theory of justice by claiming that libertarianism is based on “a strict doctrine of natural rights, violation of which is never permitted whatever consequences” (Wolff 1605).

If free market operation encompasses one of the elements that are protected by universal chords of freedom, based on the argument that people have the right to buy whatever on offer at any price or not, it sounds appropriate for price gouging to occur during periods of shortages. This would permit freedom of operation of market forces of demand and supply without state interference as Wolff Jonathan suggests in his approach to libertarianism.

Hart, Caroline. “The Capability Space and New Directions for the Philosophy of Educational Research.” Studies in Philosophy Education, 28.2 (2009) 391–402. Print.

This article introduces capability approach as a new approach of evaluating justice based on perspectives of individual wellbeing. The author argues that this approach diverges from the traditional approach of utilitarian view. He asserts, “instead of measuring well-being based on the accumulation of wealth and resources by individuals and nations, the capability approach focuses on the opportunities (capabilities) an individual has to choose and pursue a life they have a reason to value” (Hart 391).

She claims that, opposed to the approach of utilitarian which views justice as driven by normative ethics, which hold justifiable actions as those which foster maximization of utility through maximization of happiness and reduction in suffering, his capability approach views actions that foster good life for all and hence enabling human life to flourish as being justifiable.

The question that remains is, ‘Does price gouging promote happiness and reduce suffering for all people afflicted by disasters?’ From the discussion of utilitarian as offered by Caroline Hart, price gouging is nothing less than a mechanism of reducing equality among people. This claim perhaps may justify consideration of price gouging as illegal meaning that it is punishable by law. In this end, the law is a tool for enhancing justice for all.

Cheng, Chung-Ying. “Justice and Peace in Kant and Confucius.” Journal of Chinese philosophy 2.1(2007): 345-357. Print.

In the article, Cheng evaluates and critics Kant’s principles of justice. According to Cheng, “…duty to respect rights of others is the foundation of justice or equity” (345). In this sense, justice accrues from respecting other people’s perceived rights. While maintaining that justice is the foundation of Kant’s theory, Cheng says that generosity is not a requirement for justice nor should it have any role to play in justice.

In the context of the proposed research, price gouging may be seen from the context of Cheng’s work as unjust since it denies some people especially those who are less economically endowed in terms of their rights to consume products when prices escalate beyond levels, which they can afford.

On the other hand, maintaining low prices for products yet their supply is low makes a business owner sacrifice an opportunity for making more profit. Hence, retaining low prices implies that the business owner is more generous. This issue raises the dilemmas of what the right thing to do entails.

The Essay

Is price gouging justifiable?

The term Price gouging may be used in a variety of ways. In the casual sense, it means the rising of prices of service and goods to levels considered as unfair especially to the less economically endowed persons. In the legal sense, the term refers to the laws against taking economic advantage of people upon the occurrence of emergencies. This kind of price gouging may occur, for instance, when a disaster like a hurricane strikes destroying many business premises leaving behind few of them so that demand of commodities increases.

In the effort to meet the increased demand, business premise owners, for example, shop owners hike prices of the commodities. However, is this strategy the right thing to do? The overall focus of the essay is to provide a response to this query by exploring Libertarianism, utilitarianism views on price gouging, and Kantian perspectives on the same.

What is the right thing to do?

Opposing the views of Libertarianism, Utilitarianism, and Kantian notions on justice makes the dilemma discussed by Sandel in his work Justice: What’s the right thing to do even more amplified when the work is interpreted in the context of price gouging.

The idea of dismissal of price gouging during periods of high demand in comparison to supply in the occurrence of disasters such as hurricane sandy as inappropriate is pegged on the perception and premise that people who sale goods at the escalated prices above ‘normal’ are immoral capitalists.

These people focus on taking advantage of people during times in which they are living below their means. From the utilitarian positions, the most appropriate ethical action is the one which “provides the most good or does the least harm, or, to put it another way, produces the greatest balance of good over harm” (Wolff 1611).

In the context of price gouging, the right thing to do is to set and maintain prices of commodities in a manner that ensures that they produce the utmost good and or do the least harm to persons afflicted by disaster-customers. This argument would mean that customers would have to compete in buying products whose supply is limited.

The repercussion of approaching the challenge of price gouging from the above perspective is that some people who have the capability and are willing to purchase certain amounts of products are not offered the right to do so by virtue of the fact that enough products will not be available in the market.

Hence, applying utilitarianism to justify the inappropriateness of price gouging suffers especially if justice is considered a way of ensuring that all people have their rights protected. While the utilitarian would take price gouging as unethical and immoral, libertarians would consider states’ interventions to criminalize price gouging as not justified, and hence inappropriate.

Libertarians “argue for the free market and strong individual rights to property, not based on an antecedent theory of justice, but in terms of the beneficial consequences such as wealth creation and efficiency that such arrangements may bring” (Wolff 1607). Therefore, the right thing to do is to permit free operation of principles of demand and supply.

During the times of need, demand must go up. Prices must also go up to ensure that people have accessibility to products depending on the extent and magnitude they need them. This strategy is perhaps not the right thing to do based on the utilitarian positions since it appears to foster growth of massive exploitation of needy people by capitalist. However, it qualifies to be the right thing to do since it also ensures service delivery to other people who actually need them more.

People inclined to the libertarian perspective of thinking would defend price gouging since, for instance, if the price of gasoline selling at $3 per gallon remains at the same price during the times of shortage, the market would remain open to persons who actually need it less. For instance, a person wishing to power a generator so that he or she can sell other products to needy persons will have to compete equally for the limited supplies of gasoline as anybody else would.

Consequently, failing to permit market to operate freely will lead to influencing negatively other areas of service delivery. This argument correlates with the Kant’s perception of justice as argued by Cheng, “we should Know our rights and rights of others so that we can render to others what we owe to them and let others render to us what they owe to us” (346).

In the example of price gouging with respect to the price of gasoline in the event of an emergency, the right thing to do is to permit the operation of the fuel market in a manner that will ensure that all people benefit. From the Keynesian perspective, this case cannot happen if the balance of demand and supply is interfered with through state interventions.

Raising the prices of goods and services when people are in desperation is considered illegal in many nations. However, looking at it from the angle that the right thing to do is the one, which delivers utmost good to all people, price gouging is necessary. In fact, people being driven by their capitalist interests in the occurrence of disasters will risk taking goods and services to disaster-stricken areas in the quest to earn above ‘normal’ profits.

In the process, supply would exceed the demand. From the economic perspective, prices have to come down. Consequently, price gouging helps to bring normalcy fast in disaster stricken areas. If this case would ensure that people obtain utmost good from the market fast enough, from utilitarian and libertarian perspectives, price gouging is appropriate after disasters strike.

Works Cited

Cheng, Chung-Ying. “Justice and Peace in Kant and Confucius.” Journal of Chinese philosophy 2.1(2007): 345-357. Print.

Hart, Caroline. “The Capability Space and New Directions for the Philosophy of Educational Research.” Studies in Philosophy Education 28.2(2009): 391–402. Print.

Sandel, Michael. Justice: What’s the right thing to do? New York: Farrar, Straus and Giroux, 2009. Print.

Wolff, Jonathan. “Libertarianism, utility, and economic competition.” Virginia law journal 92.1(2006): 1605-1623. Print.

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