In praise of price gouging

Of course there should be a look at what is happening in the shipping sector.

Shipping costs from Asia have surged in recent months, with the price of a 40-foot container from Shanghai to Rotterdam rising to over $13,000 from about $2,000 last November. There have been ever larger rises in the cost of getting goods into the UK, eroding businesses’ margins on imported products and leading to price rises.

The surge has been driven in part by pandemic-related bottlenecks at ports, but several businesses told The Telegraph they believe some shipping companies are effectively price gouging.

Price gouging is desirable.

“The shipping companies are profiteering from the Covid pandemic,” he added. “The UK government along with the other larger global economies must act together to insist these costs are controlled to a manageable level.”

So is profiteering desirable.

The Competition and Markets Authority is considering the complaints heard by The Telegraph ahead of a decision on whether to launch a full investigation. A spokesman said: “We are aware of increases in the cost of international shipping and have received reports of market issues and allegations of collusion and price fixing – all of which we are taking seriously. As such, we welcome additional information and evidence of any alleged breach of competition law.

Collusion and price fixing - or to be accurate, collusion in price fixing - is not desirable.

The investigation, the look at, should therefore be attempting to distinguish between the two.

This applies to the price system in general, not just shipping but let us use this current example. The general economic shutdown and subsequent boom during reopening has led to shipping costing a different amount than it did before. Prices of shipping should thus change. This is how a market system allocates that scarce resource - here, shipping capacity - across the alternative possible uses of that scarce resource.

This is not just how the system does work it is also how it should work. It now costs more to get something from China. That then changes the calculation of what should be got from China. As opposed to somewhere else, or produced domestically, or done without altogether. This is not an error, it’s the very point of the price system itself.

Price gouging is thus to be welcomed as it’s that vital part of the fine tuning of our world. Who produces what, where? That some accustomed to the current set up don;t like these changes is unfortunate but also the point. Those changes in prices are the message that they should be doing something else. Reality has changed so, therefore, so too should their actions.

If some use these fluctuations to collude and therefore by cartel force up prices and their profits this is not desired. Those found to be doing so should be both uncovered and punished. If any are of course.

Which brings us back to the original point. Yes, fine, investigate. If there is evidence of price gouging then this is evidence of how the system is supposed to work and nothing need be done. Nothing should be done either as this is how said system is supposed to work. That balance of supply and demand has changed therefore prices should. If there is evidence of collusion then punishment should righteously be meted out.

The purpose of the investigation is therefore to ascertain which is happening - not, not at all, to return prices to their previous levels.

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