When two people voluntarily agree to exchange, there's no such thing as "price gouging." It's just simply the "price." However, what tends to happen (especially during emergencies) is that buyers are not happy with the emergency "price," so they call for government to threaten (or use) force against the seller. Buyers want government to ensure them the non-emergency price, which of course, leads to shortages. Ironically, the greatest "price gouger" in society is the government itself.
Hello, everybody, and thank you for tuning in to the Liberty Report.
With us today is Chris Rossini, our co-host.
Chris, welcome to the program.
It's great to be with you, Dr. Paul.
Very good.
You know, we had a busy weekend up in near D.C.
We weren't in D.C., but we had our conference.
Fantastic turnout, and I think the speakers were fantastic, and I'm so glad that we have these because, you know, if you listen to all the speakers, you can't help but learn something about it.
And your participation was great, and I think everybody that was there had a good time at the conference.
But we're back to work again, back on here.
Daniel's taking a little rest.
We really worked him hard putting that conference together.
So he's driving back again.
But today, Chris is going to be with us now for several days, and that's very good.
Everybody needs a little competition.
But they said, yeah, you better watch out.
What am I going to take your place?
What am I going to do?
Well, I can just complain or something.
But anyway, it is good to be back.
And we came across an article that Chris and I had talked about a little bit.
It was written by Brian McGlinchy.
And it's a subject that is sort of a favorite subject of mine because it's such a distortion.
And yet it plays on the emotions tremendously.
And you can't before.
And that is the subject of gouging.
You know, when there's a hurricane, when there's a problem, and when there's a flood, and people who feel, you know, really good about helping try to, but they don't do enough.
So they say, we need the government because they're charging too much money with this.
And it's so difficult.
So, but if somebody comes in and replaces and starts to solve the problem in a natural way, what do you do when there's a scarcity?
You raise prices.
And somehow or another, the market handles that.
You raise prices.
You get more supply.
So this is a subject that's been around for a long, long time.
And sometimes it's there in great detail when there's a major disaster.
And sometimes it's just one, it's ongoing where there's interference with prices.
He's charging too much and they're interfering with it.
But you know, just in my lifetime, there's been three episodes of wage and price controls that were devastating.
And in a way, it's amazing.
I was born in 35, so I was 10 by the time World War II was over, but I knew a whole lot about price controls and the difficulty of rationing because we had a little dairy and butter, I remember, was rationed.
You had to collect stamps if you had happened to sell some butter at our little shop.
And it was there, but it was really trouble where there are shortages.
I have a theory that the greater the crisis, the freer the market has to be.
But most other people, the liberals especially, but a lot of conservatives say, oh no, under shortages and a crisis, we have to divvy it up.
We have to distribute it.
And we have to write.
Then they get into trouble.
More of the liberals than a Republican.
What we have to do is outlaw gouging.
Gouging is charging more than they think it should be.
And of course that leads to trouble because as this article points out, and I think good economic policy points out, that rigging the prices at a false rate and saying people have to charge less, believe me, you can have shortages very quickly.
I remember the price controls in Korean during the Korean War and also in 1971, which was most emphatic on me because after in 19, with the breakdown of Bretton Woods, they knew the inflation was there and Nixon puts on wage and price control.
The most impressive thing I remember about 1971, once they did that, shortages didn't accumulate.
They didn't sell off their shells at the old price and that sort of thing.
Instantaneously, like within 24 hours, prices soared because they were so inclusive.
So there's not much evidence that raising prices in a time of crisis is bad and you have to have government take care of it.
And one thing they do, Chris, I think in order to get people to support it, they put a bad name on it.
You're a gouger.
You're gouging.
Which is, in a way, what all business people do and all labor does, is they go for the best price.
I want to make the most money I can.
And you have to bargain with me and tell me how much you're going to pay me.
And the same way with pricing.
You know, the businessman goes for the best price.
And it has to be competitive, though.
That's why the free market, Chris, I think the free market really solves all the problems that the people who are so anxious, Republicans and Democrats, about putting on price controls and call people who's trying to supply something at a higher price, gouger, and they're bad people.
I don't think we find it that way.
No, Dr. Paul.
And, you know, when trade is voluntary, when nobody is able to use force, there is no such thing as price gouging.
It's just the price, whether you like it or not.
Now, what happens is during emergencies, buyers want non-emergency prices.
They don't want to pay emergency prices.
And so they make the terrible mistake of running to government, asking them or lobbying them to force sellers to sell at the non-emergency price.
And with all, as with all government intervention, it backfires every time.
So let's say the normal price of a bottle of water is $2.
Every day you go in and out.
It's two bucks.
But a big storm hits and the price shoots up to $10.
Now, you may not like that, but you want that to happen.
Because if the store is forced to keep selling it at $2, they're going to run out.
By the time you get to the place, no water.
And that's what we see all the time.
No water, no gas.
Whenever you see that, you have to ask, at what price is there no water?
It's at the pre-emergency price because the seller is not allowed to sell at $10.
But let's say he is allowed to sell at $10, which he should be.
Well, then at least when you get there, there's water.
You're going to pay for it.
You're going to pay $10.
But at least there's no sign that says no water.
And what happens also is people outside of the emergency area see this, the water sellers, and they're like, oh, they're selling water for $10 a bottle.
We should transport ours there and we'll make some money.
And they would.
They'll assist.
They'll help.
But if it's kept at $2, the non-emergency price, the people on the outside be like, it's not worth it.
We can't lose money, sending our water down there.
And the water stays out.
It stays on the outside.
And all the people inside suffer because they went to the government instead of paying the voluntary price.
Very good.
Sometimes the government gets involved early on and creates the problem rather than waiting for some natural event.
Government Interference in Markets00:14:46
But just this last night, there was a change in the oil prices.
There was an indication that the Saudis and the Russians were getting together and they were going to cut the supply of oil to get the prices up.
And that gets to be a mixture.
That's not real free markets when the governments are doing it.
But it's the free market principle of supply and demand because there is a supply and demand in the free market for oil.
So maybe the adjustments will have to occur because it is an artificial price in many ways.
And I think it becomes political.
It's a political stunt of raising prices.
And sometimes it's because people feel in certain countries, like we in the United States right now, we become offended because they're cutting back on the supply of oil.
We feel offended.
And also there's some of these international controls and regulations.
And you could say that they're gouging us.
They're making charges.
But if you can just free it up, and that's one thing they can't ever do is close it down because no matter what the rules are and say we're going to raise the prices.
And so he said, well, you're gouging us.
That even in the worst of times, even in times when the Soviet system was very powerful, and even now when governments are always annoying, there's always a way to get the price down.
And that is that there is a market economy.
Some people call it a black market to give it a blad reputation.
But there is always a real price out there.
There's a market price and then there's a government price.
But the market price, exchange of currencies work the same way.
And that is something that people have to realize that the market is most useful when the problems are the greatest, whether it's the government manipulating and writing too many rules and regulations.
It might be that somebody might want to trade their labor.
Oh, well, that's terrible.
It shouldn't be terrible in a free society.
Trade your labor for something else and get around some of this other manipulation by government.
But actually, the government is, they introduce and create this problem.
And since we have the world reserve currency, we're a participant and an instigator of that.
So we have the power and the influence at the present time of issuing the reserve currency of the world, and everybody's supposed to use it.
Saudi Arabia had made a promise with Nixon that way would use the dollar.
Now they're making deals with Russia.
So it's adjusting because people get around it and they have these agreements, but they don't work.
But the worse the problem, the greater the need is for markets.
I mentioned I remember the wage and price controls of World War II.
And there were shortages and there were problems.
But when you add on to it regulations of prices and things, it doesn't help solve it.
So I would say that the best thing to do, the more problems we have with skyrocketing prices, is free up the market as quickly as possible.
And I'll tell you what, if you want to punish the so-called gouchers, what you want to do is free up the market and the market will teach them a lesson.
Very good, Dr. Paul.
Yes.
One thing that should be understood by more, but unfortunately it isn't, is that sellers, any seller, does not have to sell you anything.
You're not entitled to anything that anybody else has to sell any more than they're entitled to what you have to trade or sell.
You know, I remember as a kid trading baseball cards with my friends and comic books, and we would barter with each other.
You know, I'll give you these three cards for this one, you know, great player.
And he would say yes or no.
And I'd say, well, how about these five?
You know, and so I can't imagine going to the government and say, hey, force him to give me that for these two cards.
That's insanity.
Why would you do that?
You know, you peacefully come to a yes or no.
Okay, this is worth it to me.
This is not worth it to me.
So, you know, it's not just politicians who want to use government to hassle us.
And they do want to use government.
They want to be in control of it.
And they want to hassle us.
We saw this with COVID, that it's the people, too.
The people want to use government to their advantage if they can.
Now, they'll bellyache and complain because most of the time it's used against you.
But if they can find a way to use government to their advantage, they're more than happy to do it.
They're more than happy to have their congressmen go rob their neighbor to pay for their health care or education or whatever.
So, you know, they're more than happy to do it.
And that's a big problem with government is you have all these people who think that they could use it to their advantage against others.
Very good, Chris.
And you make a good point about how the problems are solved.
And it's strictly voluntarism.
Both sides have to have an agreement.
And if it's too high and you don't want it or you can't, you go someplace else and somebody else will come in.
It's once you get involved.
But there's so much government.
What about the effort of the government to create or manipulate and set wage rates?
And sometimes wages are much lower than they should be.
And the market will and can solve those problems.
But if you have the government come in and you start manipulating this, this gets in more trouble.
But the one thing that the government really gets the market into trouble is the rigging of the price of money.
That is the interest rate.
That's the weapon, the favorite weapon of the Federal Reserve.
And they have a mixed job there.
One is to protect the interests of the financial sectors and the insiders and the people who want us to spend all the money and print up the money and others who want to try to make it fair and try to get prices up and do these things.
But the government says, oh, well, today we think the interest rates are too high and it's wrecking the economy.
We know better.
And then they'll switch it around.
Well, they caused the one in the first place.
Then they agitate on how they're going to correct the problem they make.
But rigging the price of money is so important.
And that's where a government and a country like ours is susceptible to doing a lot more mischief than they realize.
Because we have, if we don't like what people are doing around the world, we sanction them.
We freeze up their assets.
Sometimes we get into military confrontations with them.
And so the sanctions, if the sanctions don't work, sometimes we threaten military force.
So that, and that's over the price, the price of money.
The market, if all of a sudden we didn't have any rigging of this and just let things go, nobody knows what the interest rates would be.
But I tell you what, when it was below zero, below one, I'll tell you, it was so artificial.
Everybody knew it wasn't one, so they were out there doing a lot of things they shouldn't do, and now they're sorry about all the things that they end up owning.
So this is very important.
So that is one price that the government has, tries to have absolute control on, but that again encourages an underground, quiet economy.
And they can't stop that.
Even in the Soviet system, you can find out many, many stories how they got around all the regulations.
And probably what they could get around with them probably was very helpful.
But they don't develop the principle of allowing everybody to do that and not make it criminals if they want to use the market, but want to use voluntarism.
And, you know, this is the evil of depending on government force to accomplish something that is voluntary.
So if it's voluntary in the economy, that's one thing.
But I like to think that voluntarism should be used in all areas of the economy, social relationships, and also international relationship.
Because if you don't have two people voluntary, what do you have?
You have one boss over the other.
You end up with problems.
Chris?
Fantastic.
Dr. Paul, I'll finish up with my closing thoughts.
Yeah, so price gouging in a voluntary free market does not exist.
It's just prices.
But the irony in all of this that we've been talking about is there actually are price gougers in our society, and it's the government themselves.
You know, with a company or a corporation or even a sole proprietor or whatever, you always, as a buyer, have the ability to say no.
No.
Even when they try to use government force like they did with the vaccines, you can say no.
And many people did.
They said, even when you're trying to force me, no, get lost.
Okay.
But the government gouges us when they spend $35 trillion that they don't have.
And we have no say in the matter.
They just stick us in debt that we're going to have to pay and our kids are going to have to pay.
When they take our money from us and send $100 billion to Ukraine, they are gouging us because we would never do that on our own.
We are not stupid.
Or people that want to voluntarily send their money, go ahead.
But they don't even care what we think.
They take the money from us and they go send it to Ukraine and to all the big manufacturers of weapons.
So they are gouging us.
And we're sitting here worried about the price of water when they're sending $100 billion of our money away.
So that's the difference between we can say no to a company, a corporation, but try saying no to not paying your taxes and see what happens to you.
Then violence is threatened against you.
Walmart can never use violence against you.
You could never step into a Walmart as long as you live, but try not paying your taxes and you see what happens.
So government, they are the price gougers.
They do not help you in an emergency.
They will only hurt you even worse.
But, you know, these are things that people need to think through to understand.
And that's the only way to stop the mess that they make.
Very nice.
The price mechanism is very valuable in making economic decisions, obviously.
And if prices go up, business people have, and they have to anticipate why they're going up and how long they're going to last.
Even in a free market, that's their job.
And sometimes they win and sometimes they lose and they're rewarded by the market.
People buy their products because they can do a better job in providing it for it.
And we have to realize that the price, if it's interfered with, interferes with what I call the engine of production.
We know where the engine of inflation comes from.
That's the spending and all the special interests and all the power mongers and the wars and welfare state.
That is an engine, but the Federal Reserve is the true engine.
In this case, it's production in the marketplace.
If you interfere with it and you mess it up by wage and price controls, yes, that hurts the engine of production and production falls off.
And that's why we have these miserable downturns, recessions, and depressions.
So the demand, the market, what we have to do is look to the market for the answer.
But you know, sometimes the left might say, yeah, this is true, there's problems, but we only want to control prices.
We're not going to do it to the people who are called laborers.
We're not going to regulate labor prices.
Well, no, it'll just be price controls.
But guess what?
If you have that power to regulate the prices, it's not going to be an eternity because in the past and in our history, they very often regulate the wages too, and they believe they can balance this all out.
And sometimes they raise wages, sometimes they freeze wages.
And it's the interference.
It's the interference in people making decisions.
And like I said, making decisions should be universally made free as long as you don't hurt anybody.
And you cannot include in this hurt somebody by saying he charged too much.
He's gouging.
Well, Chris explained that very, very well: that it's a voluntary thing and people come together for reasons that benefits both sides.
Interesting subject, very important.
A lot of misunderstanding because we've already seen it states not too long ago that you'd think they would know more about the marketplace.
They're saying, well, there's a hurricane.
We got to stop the gougers.
We got to regulate prices.
They can't take advantage of it.
But if you want the supply to go up, let the price go up, and the prices quickly come down.
And the people do it with products, and it works out.
And the one thing is that people don't want to admit, you know, if the price is too hard, maybe they won't use so much of it.
When prices, gasoline soar, you know, for sudden reasons, you know, all of a sudden people say, oh, it went to $10 to fill up my tank.