Wednesday, December 23, 2009

The AG Is No Economist

Talifaitasi W. Satele

Assistant Attorney General Kornegay says that “the raising of these prices for necessities harms the people of American Samoa and its economy”. He argues that his statement is a “fact”. However, Jerry Taylor and Peter Van Doren of the Cato Institute argue in their essay, Let ’Em Gouge: A Defense of Price Gouging, that “price gouging — like spinach — may be unappealing at first bite but it’s good for everyone in the long run”.

Obviously, there are economists who would beg to differ with Mr. Kornegay.

However, my concern is less about the economics of it all and more about the lack of recognition by our government that these storeowners have done nothing wrong. Their alleged crime: ask for a higher price for their property, their merchandise after a natural disaster.

If we are all free men, then we assume that everyone’s rights are respected and protected by the government and that we only trade with one another on a voluntary basis. That basis then is our own self-interest with the seller seeking the highest price possible and the buyer shooting for the lowest. Where the two meet in the middle is a voluntary transaction between two free individuals, a.k.a the market price.

It should be no more a crime for a storeowner to be able to charge a million bucks for something after a natural disaster than it is for customers to get discounted prices, or even for free, from a storeowner who’s going out of business. Yet when the entrepreneur goes out of business and has to get rid of his inventory to discontinue his overhead costs, no one sheds a tear for him as his customers walk away with dead giveaways.

Is it because there are less storeowners than there are shoppers (meaning voters) that his predicament is of less concern to our majority-rule government and grandstanding politicians? Are his rights worth less because his vote won’t help win an election?

None of us have a right to our property when the government can dictate the price at which we can sell it. And government doesn’t fulfill its role of protecting our right to private property when its own law doesn’t even respect the very idea of it.

Mr. Taylor and Mr. Van Doren go on to say that “gouging… sets off an economic chain reaction that ultimately remedies the shortages that led to the gouging in the first place”. While protecting our right to price our own property (regardless of the circumstances) helps more than harms our economy, it is absolutely necessary for a free society to exist.