Katrina and Price Gouging

I just heard on CNN about the people who can't return to New Orleans because rents have doubled and tripled. The interviewer asked the people seeking to return if they thought this was "price gouging." What country are these people living in? There is no such thing as price gouging in a capitalist economy - only the law of supply and demand. Prices are charged according to what the market will bear. That's the only consideration. It seems like half the population (the tenants) is living in a world that doesn't exist, where concepts like "fair prices" and "price gouging" have some kind of meaning. These concepts are totally inoperable in the US or any capitalist economy and are perpetuated by ignorant people who are living in a fairyland or who are seeking to hide the economic realities and facts of life. The landlords know what they are doing. They are charging what the market will bear. Why? Well the housing stock (supply) is way down because of all the homes or apartments that were damaged or destroyed by the hurricane. Demand exceeds supply. Therefore, the price goes up. It's as simple as that.

It's not a question of whether "price gouging" is legal or illegal. It's just that the concept doesn't exist in a capitalist economy. Why do supposedly knowledgeable people (like CNN) perpetuate this myth? Why doesn't the educational system disabuse people of these notions? Because it serves the purposes of the owners of property (I hate to say the capitalist class) to keep the rest of us in the dark and to perpetuate the myth.

They interviewed a property manager who claimed that he had to raise rents because half his units were out of commission, and he had to make it up with the other half. BS. The market doesn't care if half his units are out of commission. If someone magically quintupled the housing supply overnight, he would have to reduce his rents just to keep the other half of his properties rented. Again it's supply and demand. He said laborers who are repairing damaged properties are charging more than they used to before the flood and that's why he had to raise rents. Again BS. The laborers are charging more because they are in greater demand than they were before the flood and there is a lesser supply of them. Again the law of supply and demand. It also works in labor's favor sometimes.

Property owners and laborers are profiting from the law of supply and demand. It doesn't always work to benefit owners - just most of the time since normally laborers are a dime a dozen.

When are we going to stop deluding ourselves and others about "fair pricing" and "price gouging" which by the way, even if it did exist is not illegal in any state. How could it be ? Capitalism (which is based on the law of supply and demand) and price gouging are oxymorons. I hate to see the perpetuation of this myth that nice people charge "fair prices" and don't "price gouge." Adam Smith would be rolling over in his grave. See the blog on my  website Social Choice and Beyond for more on the law of supply and demand.