News Story

Economist: No Sanitizer Because ‘Selfish People Demanding Price Be Held at $1’ Bought It All

Under ‘price gouging’ bans, after the lucky first few, ‘everyone else gets nothing’

An economist at a national economic think tank is using an actual 'price gouging' complaint filed with the Michigan Attorney General to illustrate why government-imposed price controls cause store shelves to empty more quickly than they would otherwise during an emergency.

The alleged price-gouging incident occurred on March 8 at noon in Dearborn, according to the Michigan Department of Attorney General.

The complaint read: “Everyone is afraid of the covid 19 coronavirus. There are no more hand sanitizer in large retailers and small stores. All stores were out of stock. However, the Dearborn fresh supermarket was selling an 8 oz hand sanitizer for a price of 10 dollars. This is clear price gouging during this panic. $1 hand sanitizer is now $10. They are causing consumers to panic. This is illegal and against the law. Please look into this matter as soon as possible. Truly inhumane and no regard for the people.”

But Antony Davies, the Milton Friedman Distinguished Fellow at the Foundation for Economic Education, said the complaint makes a bad argument for government-imposed price controls.

“A price is not a lever that one throws so as to alter reality,” Davies said in an email. “A price is a metric that responds to a reality that already exists. The store does not cause people to panic by raising the price of hand sanitizer. The store raises the price of hand sanitizer in response to the fact that people are panicking.”

Davies said those consumers who dislike price hikes during an emergency are short-sighted if not selfish.

“They aren’t thinking about their neighbors or the poor. They are annoyed that they have to pay more than they’d like,” Davies said. “How do I know this? Because the people who are most upset that the store is charging a high price are the people who are fortunate enough to show up at the store while there is still product on the shelf. These people stand there looking at a bottle of hand sanitizer and become outraged that they will have to pay $10 when they would rather pay $1.”

Davies argues that forcing a store to charge $1 for hand sanitizer when it is in high demand will just clear the shelves.

“If we force the store to charge $1, these people will show up and see a $1 price tag, but no hand sanitizer. Why is there no hand sanitizer? Because the selfish people who got there first, demanding that the price be held at $1, bought it all,” Davies said.

Davies said that the two alternative situations reveal the economic truth about laws against price gouging.

“Anti-price gouging laws are not about choosing between $10 hand sanitizer and $1 hand sanitizer. They are about choosing between $10 hand sanitizer and no hand sanitizer. When we outlaw price gouging, only a small group of privileged people get $1 hand sanitizer. Everyone else gets nothing.”

The complaint complaint from Dearborn about hand sanitizer was one of about 1,600 the state has received on epidemic-related price hikes, according to the Attorney General.

Davies posted on Twitter: “Trying to battle a shortage by prohibiting prices from rising is no different than trying to battle the virus by prohibiting thermometers from registering more than 98.6 degrees. Both ignore the disease in favor of regulating the tool that measures the disease.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.