Wednesday, September 5, 2012

Price Gouging and the Knowledge Problem

 If we should make price gouging illegal, then we have to ask, how do we solve the 'knowledge' problem? i.e.

Is there a 'more appropriate' price that should be charged? How do we find a price that ensures that the intensity of your desire/need for a generator is consistent with my willingness to provide one? Should we rely on market forces and prices at all or simply have some authority distribute generators based on some set of rules? Rules based on what criteria? How many generators are required and how do we make sure that they get to the people that have the greatest need/desire for them? i.e. how do we know if generators are allocated to the most highly valued use? What lessons can we learn from Hurricane Katrina about the government's ability to mobilize resources during a natural disaster? See also:

The use of knowledge in disaster relief:

The Government's Response to Hurricane Katrina- A Public Choice Analysis:
The Problem with Price Gouging Laws-Regulation Spring 2011:

The Knowledge Problem - blog posts related to price gouging:

Environmental Economics blog post related to price gouging: