Morality and Markets

Doug and I just returned from the annual meetings of the Southern Economic Association. Doug presented our preliminary results on the "reverse crowding out" (see below) and we checked out several paper presentations relating to this blog. I'd like to elaborate on one idea here.

You've probably heard the story of individuals loading up their own single pick-up trucks with plywood and driving to areas affected by a hurricane. Such folks essentially open up shop on their tailgates, charging prices well above what they paid in their (inland) hometowns. I am confident that many Christian clergy find this practice un-Christian and support emergency measures to prevent "price gouging." As an economist and a Christian, I am happy to take the opposite opinion. As an economist, I can explain the objective consequences of price controls (fewer supplies will flow in; more rationing will be by line-standing and illegal markets) as well as the welfare and distributional consequences. As a Christian I have no problem finding these laws wanting (at the end of the day, they just as plausibly hurt as help the poor). [In a longer discussion, I would probably look at some of the moral attributes of different types of pricing or negotiating]. I believe that many if not most economists would agree with my analysis.

But let's expand the example a little. Suppose you have a Christian (even an economist) who loads up his or her pickup-truck and heads to the hurricane zone, but with the express purpose of driving to poorer neighborhoods and either giving away the plywood or selling it for the "inland" pre-hurricane price. From an economist's point of view, has this person been unwise or even unhelpful? I came away from one session believing that there are more economists than I realized who would answer "Yes" to that question, and I have problems with that. Their argument evaluates the specific outcomes themselves.... my hypothetical agent of grace distributed the plywood at other than the market clearing price. I can simultaneously oppose price controls and believe that it is not only acceptable but even praiseworthy to engage in the charitable actions I describe, because to me the essence of the free market is the realization of human freedom, including the freedom of an individual to give away plywood to poor people. But this is only a shadow of a full debate...there is a longer post here and I hope to get back to this in the near future.