A customer picks up some of the last toilet paper at a store in Dayton, Ohio, March 13, 2020. (Kyle Grillot/Reuters)

Denying that a thing is worth what another person is willing to pay for it is like denying gravity.

You, sir! You whose shopping cart squeals beneath the weight of half a dozen 48-packs of toilet tissue! Come now, be reasonable. How many rolls do you really need to get you through the next week or so? A four-pack, you say? Wonderful. Bless you for your civic-mindedness. You may now put 284 rolls of TP back on the shelves so that a dozen fellow citizens who really need it can get it.


Wouldn’t it be wonderful if someone trustworthy and courteous and concerned with the common good could stand in front of the registers at Costco calming people’s fears and successfully urging them to buy only what they actually need? Someone as folksy and good-hearted as, say, Jimmy Stewart during the scene in which there’s a run on the Building and Loan (i.e. bank) in It’s a Wonderful Life?

Good news, friends! We already have Jimmy Stewart. He’s right here among us. Only his name is “market pricing.”

My colleague John Hirschauer has looked at worrisome remarks made by politicians about interfering with pricing signals and explained the academic research on the wisdom of setting price controls during a crisis. Now let’s consider the matter from the point of view of community and common sense. Free enterprise — sometimes called capitalism — is a wonderful thing in normal times because during every non-coercive transaction, the buyer would rather have the thing he’s buying than the money, and the seller would rather have the money. Each freely entered-upon transaction increases global well-being.


But capitalism is especially useful in a crisis, when there is market disruption. When times turn dark, capitalism is, more than ever, your friend. Let’s say stores run out of toilet paper or hand sanitizer or diesel fuel because of panic buying during the age of COVID-19, and no one can find these items in stores. Why people are punching each other over the Charmin while leaving the Robitussin and Tylenol alone is a mystery, but that is of no moment. What matters is that toilet paper is suddenly more valuable simply because demand has surged. That means people are bidding up the price. Or they would be, if the stores allowed this. If Costco quadrupled the price of whatever item is selling out, there wouldn’t be any shortages of anything. Market pricing would restore normal functioning.


Costco doesn’t do this because of what economists call “good will,” which essentially means “fear of bad publicity propagated by economic illiterates.” So what does Costco do instead? It sells products for their everyday prices, creating the potential for a secondary market if shelves are empty. In other words, things that people are desperate to get are on sale for the same old price, except . . . you can’t find them anywhere. Thinking through this matter calls for the wisdom of Bruce Springsteen.


Springsteen used to sell tickets to his concerts for very low prices because he wanted ordinary working men and women to be able to afford them. What actually happened: Ticket resellers bought up all the tickets. So a ticket with a face value of $30 went for $100, except $70 of that went to a third party. At some point it occurred to Springsteen that if tickets to his shows were selling for $100, it didn’t make a lot of sense for $70 of that to go to a middleman who not only didn’t write “Born to Run,” he didn’t even write “Workin’ on a Dream.” Years ago, Springsteen dropped his “friend of the working man” pricing policy, which is why the last time I went to one of his concerts the face value of the ticket was $350. Is Springsteen guilty of “price gouging” for denying ticket resellers the opportunity to make gigantic profits from his work and artistry? Were those resellers guilty of “price gouging” for selling those tickets for what people were willing to pay?

Some guy who bought $70,000 worth of hand sanitizer and wipes with an eye toward “price gouging,” i.e. reselling these items for whatever the market determines their worth to be at this moment, should be drawn and quartered after he is tarred and feathered but before he is hanged from the nearest lamppost, say social-media users. Wrong. These items were selling for less than their market value at Dollar Tree and Walgreens, where the guy snapped them up. When retailers don’t charge market rates, middlemen naturally step in to ensure proper pricing. Would we rather he store the stuff in his basement and not share it with the community, which is what ordinary Costco hoarders are selfishly and mindlessly doing as a group? Why shrug at hoarding but be cross with the anti-hoarder, the reseller? Value is, as always, highly contingent on time and place, as you would know if you’ve ever bought a happy-hour drink, a Tuesday night ticket to the movies, or an off-peak train ticket.



What Sanitizer Man was trying to do was ordinary retail arbitrage, which is a widely practiced multibillion-dollar business even in non-panicky times. (Don’t believe me because I’m a heartless capitalist? Then take it from those fluffy empaths at NPR. There is an excellent Planet Money podcast on retail arbitrage.) In times of panic, such as when a storm hits, the value of certain items can increase dramatically. Snow shovels are worth a lot more after a blizzard. Batteries and flashlights are worth a lot more during a power outage. A wise merchant will adjust prices accordingly, i.e., offer a snow shovel that used to be $20 for $80. Denying that a thing is worth what another person is willing to pay for it is like denying any other scientific law, like gravity.

What happens if the merchant doesn’t “price gouge” is that his critical items may simply disappear instantly and the person who really needs that snow shovel, needs it so badly that he must have it right now, can’t have it. This is a needless, possibly lethal, cruelty that free movement of prices smoothly corrects (the economists Russ Roberts and Mike Munger explain in detail on the EconTalk podcast). Say that after a blizzard there’s a doctor whose old shovel just broke and who treats lots of elderly patients who might slip and fall and break bones on the sidewalk outside his office. He can’t have a shovel for any price because an ordinary homeowner who already has a serviceable shovel and whose house is not going to be approached by anyone anyway in the next few days happened to get to the store before the doctor and bought a backup he didn’t really need just in case.

Market pricing is how we allocate goods according to greatest need. It’s how we maintain civilization. When we allow market pricing to work its wonders, it forces people to be civic-minded, forces us to be that guy in It’s a Wonderful Life who decides he can get by on $20 for now, instead of taking out the $300 in his bank account. When we interfere with market pricing, it’s like turning away the public-spirited Jimmy Stewart and declaring that it’s every man for himself.