Wiped out: No toilet paper or paper products to be found at Walmart in Pella, Iowa.
Photo Credit: Shane Vander Hart

I hear a lot of condemnation these days of the price gouging on the part of retail outlets like Amazon.

Those who are casting those stones need a lesson in economics: The gougers are the heroes, and the hoarders are the villains.

The law of supply and demand tells us that when the demand for something skyrockets, its price will increase accordingly. This is not only natural, but it’s necessary. When we are faced with an emergency (in this case caused by fear more than anything else), the demand for critical supplies goes through the roof. If the price remains the same as it was before, which is what most people mistakenly think should happen, people will hoard that product. In other words, they will buy far more than they need. The result? A shortage. When shortages like this occur, large numbers of people are unable to obtain those critical supplies because the hoarders have selfishly bought it all up, leaving none for other people who desperately need it. Increasing prices in times of emergency are the only thing that protects us against shortages.

The so-called “gougers” are doing society a favor: they’re making sure through higher prices that people don’t hoard supplies and that others who need those supplies can obtain them.

The people who are harmed the most by shortages are the poor. Why? Because they can’t afford to stock up on critical supplies like wealthier people can. In other words, hoarding is a luxury that is not open to them. They indeed have to pay more for those supplies in times like this, but they would rather pay a higher price than be unable to obtain them at all.

Rather than shaming Amazon, everyone should be thanking them.

Some of us remember the 1973 kurfuffle known as the “Energy Crisis.” This was fueled (no pun intended) by the Arab oil embargo. When gasoline subsequently became scarce, the government imposed price controls at the pump so the “greedy” oil distributors wouldn’t “take advantage” of the situation. The result? A massive gasoline shortage, long lines at the pump, and people being unable to go anywhere for lack of gas in their cars.

A current example of this reality is the toilet paper shortage. Retail outlets like Walmart and grocery stores let us all down in a big way when people started hoarding toilet paper. As soon as they realized there was about to be a run on toilet paper, they should have immediately raised the price for it—by a lot. If they had done this, they would have curtailed the buying frenzy on toilet paper, and there wouldn’t have been a shortage. But since they failed us consumers, those shelves are now empty. This is true of several other items as well.

We intuitively think it’s cruel, selfish, and unjust to raise prices on critical supplies. Most people would condemn this as unbridled greed and malicious exploitation of those in need. I call this the Bondi Fallacy, named after Pam Bondi whose ignorance of basic economic principles drove her to outlaw price “gouging” in times of emergency. Because of her ignorance, untold numbers of people have had to do without crucial supplies they desperately needed in times of crisis.

There may be people who will take advantage of a crisis, and will genuinely act out of greed by buying up supplies and selling them at a higher price. I would argue that those people are few and far between—do we really think anyone is going to get rich selling high-priced toilet paper? But the people who are not greedy but want to do this to help others will do exactly the same thing. So at the end of the day, the motivation behind it is irrelevant.

9 comments
  1. If fear is what is causing people to hoard, then why not condemn the MSM that is CAUSING the fear? Instead, you want to place the blame on the ones IN fear. How else do you expect people to react?

  2. There are other ways to discourage hoarding. Take the Great Toilet Paper Rush of 2020 for example, instead of retailers raising the price of the TP, which would still skew the advantage to the more affluent, the retailers could have merely limited the quantity of purchase. How about that for a calm, rational and equitable solution?

    1. I prefer limits like that myself, but that’s only enforceable on a per trip basis which may have stopped the TP rush or not. We’ll never know for certain.

    1. Hi, I’m the editor of Caffeinated Thoughts, I’d encourage you to implement fair use practices and include no more than four paragraphs in your excerpt on your blog. If you publish the entire thing at your blog there is no incentive to click over here. Thanks.

  3. Another consideration: If a merchant is dependent upon a steady turnaround of his product for a reasonable profit, what happens when that product becomes less available? Supply shortages or disruptions can only be offset by the one thing under the merchant’s control; his prices. Selling less of something at a higher price stabilizes his bottom line. If he takes it beyond the equilibrium of cost and demand, his business will suffer until he lowers his prices to what the market will bear.
    There’s nothing immoral about acting in one’s own self-interest.

  4. This article is the bullshit. The author uses economics 101 to explain a complex economic system. One flaw in his thinking is, what about people on fixed incomes, such as seniors? With the premise of this article, only the well off would be able to buy food and services.That would surely lead to riots. How would the author’s premise conflict with state laws against gouging? I could go on. Even school children are taught about supply and demand, but economic systems are far more complex.

  5. Written by a true cynical retailer.
    The fallacy in your diatribe is that hoarders will not pay more but those without will.
    Hoarding is just as bad as gouging and no level of common sense can condone either.
    Both the hoarder and the gouger should be shot dead where they stand in my world.
    Why? This is precisely when, We Do Not Change The Rules.
    I have no compassion for either of you.

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