. . . most people view the practice of zone pricing in gasoline markets as unfairly taking advantage of consumers. Yet many of those same people — who will curse a blue streak if you put them in front of a camera and ask them about "Big Oil" — are as we speak putting their houses on the market and enthusiastically gouging the living daylights out of anyone looking for a new home. And what's more, they're zone pricing! Surprisingly, however, no one ever rages against real estate price gouging. In fact, the opposite is the case. Business reporters gush about returns and politicians pledge to do whatever it takes to keep the real estate bubble afloat.
So is price gouging okay if you're the gouger but not the gougee? It would appear so. But in reality, price gouging — like spinach — may be unappealing at first bite but it's good for everyone in the long run. Gougers are sending an important signal to market actors that something is scarce and that profits are available to those who produce or sell that something. Gouging thus sets off an economic chain reaction that ultimately remedies the shortages that led to the gouging in the first place. Without such signals, we'd never know how to efficiently invest our resources. Moreover, we'd have no idea what to conserve. It's no exaggeration to state that, without such price signals, our economy would look like Cuba's.
People hate to pay high prices, but high prices are what ensure that some products will be produced. The 417 Greeneway in Orlando is quite free from traffic at a toll price. I-4 on the other hand is a "free" nightmare. I am allowed to spend my time on I-4 or I am allowed to spend my money on the 417. At some point, we'll choose to ride our bikes to work if the roads are too busy or gas is too much. A price is nothing but a consumer choice. Higher housing prices mean that more developers will build houses to take advantage of the price. More total houses will then help the prices level off or drop. Henry Hazlitt explains these ideas much better than me in ECONOMICS ON ONE LESSON.
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