Monday, May 15, 2006

Richard Blumenthal vs. The Free Market

I meant to comment on this last week: Four Connecticut gas stations pay 27,000 in price-gouging settlements.

This is not about price gouging, or about the consumer, this is about the slimiest attorney general in the business, Richard Blumenthal, who is more concerned with playing politics than doing his job. (And this isn't the lonely libertarian playing politics - politicians will be politicians, but an attorney general should be held to a higher standard. And Richard Blumenthal has routinely opted for photo ops over substance. And for matters of full disclosure, there is some personal bias here. Blumenthal's office attempted to shut down a perfectly legal operation within the lonely libertarian's family business conducting testing for anthrax and other dangerous substances. All the procedures and regulations had been met, we were just the only private laboratory in the state to attempt to conduct such testing. Despite this, will still received a cease and desist order from Blumenthal's office, reinforcing my opinions about him.)

But back to price gouging. Let's say for instance that I want to start a hot dog stand. My first day in business, I charge $1.00 per hot dog. After my meager returns on day one, I decide that I could make a lot more money by charging $100.00 per hot dog. Am I guilty of price gouging? Should Richard Blumenthal come after me with all the force of the law?

The obvious response is, "no one would pay $100.00 for a hot dog." Probably in the very same way that no one would pay for gasoline from these stations if these same owners have marked their prices up to $100.00 per gallon. In all likelihood, if you charge prices that deviate that much from market value, no one is going to buy from you, both because people can't afford it, and because people know they can find the same product somewhere else for a far cheaper price.

So then what is price gouging? If the above scenario is not price gouging, then price gouging is dependant upon the actions of consumers. In other words, you're only price gouging if people actually agree to buy a product at the price you're selling it. (Of course, our legal system is full of exchanges between consenting parties which are prohibited by law.)

The argument that gasoline or oil is somehow different than hot dogs or other consumer goods just doesn't fly, unless you buy the argument that there is a more effective mechanism than the free market for distributing goods and services. (And the problem with that is, if there is a more efficient mechanism than the free market, than why not use that mechanism for everything?)

If all this is true, then why would these stations settle? Not because they were guilty of anything, but simply to avoid further legal fees. This isn’t about anything but placing blame, and more photo ops for Richard Blumenthal. I don’t buy it.


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