Academic

Zwolinski on Price Gouging

By Lawrence Solum

Matt Zwolinski has posted The Ethics of Price Gouging on SSRN.  Here is the abstract:

Price gouging occurs when, in the wake of an emergency, sellers of a certain necessary goods sharply raise their prices beyond the level needed to cover increased costs. Most people think that price gouging is immoral, and most states have laws rendering the practice a civil or criminal offense. The purpose of this paper is to explore some of the philosophic issues surrounding price gouging, and to argue that the common moral condemnation of it is largely mistaken. I make this argument in three steps, by rebutting three widely held beliefs about the ethics of price gouging: 1) that laws prohibiting price gouging are morally justified, 2) that price gouging is morally impermissible behavior, even if it ought not be illegal, and 3) that price gouging reflects poorly on the moral character of those who engage in it, even if the act itself is not morally impermissible.

Recommended.  In some ways, the more interesting question is how to account for the intuitions that price "gouging" is immoral and should be illegal--given the strong economic & moral case that it can be made for its legality & permissibility.  Here is a bit more from the part of the paper that deals with the aretaic/virtue-centered alternative:

It is, however, a bit of a puzzle why one might think that engaging in a morally permissible activity would constitute evidence of an immoral character. If an action is morally permissible, then what can one?s performing that action say about one?s character other than that one is disposed to perform morally permissible actions? Still, many find arguments of this sort convincing. Immanuel Kant, for instance, thought that non-human animals did not have moral status, and hence that there was nothing wrong per se with treating them as mere means to one?s own ends. Still, even Kant thought there was something wrong with people who inflict gratuitous suffering on animals. What was wrong with them, however, was not merely that they were causing animals to suffer, but that in doing so they betrayed a defect in their character. The kind of people who inflict gratuitous suffering on animals, Kant reasoned, tend to also be the kind of people who inflict gratuitous suffering on human beings. Hence, even though there?s nothing morally wrong with causing animals to suffer in itself, people who do so thereby demonstrate that they are likely to do other things which are morally wrong ? viz., causing human beings to suffer.

Kant?s reasoning points us in the direction of one way in which engaging in morally permissible behavior might betray a morally vicious character. We should notice, though, that Kant?s reasoning is only valid on the assumption that moral character operates in a fairly ?coarsegrained? way. After all, it certainly seems as though there is a fairly sharp and obvious distinction to be made between hurting animals and hurting human beings, such that even if one had a disposition to engage in the former sort of activity, one might lack the disposition to engage in activity of the latter sort. If, however, our dispositions are so coarse-grained that they cannot track the relatively fine-grained distinctions between different the different targets on which cruelty might be inflicted, then it is possible that there will be what Nozick calls an ?undesirable moral spillover? between actions of one sort and actions of another.l On this scenario, our options are less like a ?disposition to hurt animals? versus a ?disposition to hurt human beings,? and more like a ?disposition to hurt living things? or not. One who hurts animals is expressing a disposition of this latter coarse-grained sort, and this, on the Kantian account, makes him liable to do some things which are morally permissible (hurting non-human animals) but also to do some things which are morally impermissible (hurting human beings).

As it so happens, Kant was mostly correct when it comes to people who inflict needless suffering on animals.li But notice that his argument rests inescapably on empirical premises. Whether our dispositions are fine- or coarse-grained is a question for empirical psychologists to resolve, not one which can be settled from the philosopher?s armchair. And there?s no reason to suppose that the answers psychologists return will be of a tidy or uniform sort. Human beings might be very poor at drawing distinctions between different instances of inflicting pain, but very good at drawing distinctions between, say, different ways of expressing falsehoods (most people, I would suppose, are unlike Kant in recognizing a rather stark moral difference between lying to one?s boss about one?s educational experience and lying to a murderer at one?s doorstep about the location of his intended victim).

It is similarly an empirical question, then, whether the motivations which drive people to engage in price gouging are sufficiently coarse-grained that they will, as a tendency or as an inexorable psychology law, drive them to engage in morally impermissible acts as well. A disposition to charge market-clearing prices for necessary items to desperate people might also be a disposition to engage in acts of fraud or coercion against the vulnerable when one can make a profit by doing so. But then again, it might not.

I should have thought that the more obvious aretaic critique of most price gouging would not be based on a vice that is connected with a disposition to do the impermissible--most plausibly connected with the virtue of justice & perhaps pleonexia.  Rather, the salient vices (in a neo-Aristotelian virtue ethics) might be beneficience and liberality--mediated, of course, by phronesis or practical wisdom.   To the extent that justice comes into play, the full account must include equity--which in this context would correct strict legal justice with what Terry Irwin translates as "fairmindedness."

Wouldn't the phronimos, fully equipped with the moral virtues including justice (incorporating equity), liberality, and beneficience, be disposed to charge less than the market will bear?  Of course, attention to practical wisdom suggests that this disposition will be situation dependent.  A local shopkeeper who knows her customers (and hence who would be capable of non-price based rationing) might be in a better position to charge "reasonable prices" than a regional big-box store that might cause harm by using queuing, which could turn out to be a harmful and inefficent method of distributing a scarce resource such as food or fuel.

Zwolinski might return to permissibility as the master moral concept in this context, but surely that would beg the big question--whether virtue ethics offers a more supple account of the morality of "gouging."

Read Zwolinski's paper.

Full post as published by Legal Theory Blog on February 29, 2008 (boomark / email).