re: Price gouging in a temporary supply crunch like the Colonial situation should be allowed

quote:

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Price controls lead to shortages

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This can be true. It can also be true that shortages arise when supply is fundamentally unable to meet demand.


This is what happened in gas markets during the Texas winter storm. It didn’t matter that unregulated markets allowed the price of gas to rise by 10000% in a day; there simply was not enough production to meet the demand, and no degree of price increase was going to change that.

In such extreme cases, in makes sense to put an upper limit on the allowable price increase of the good.

We aren’t close to that limit with this pipeline issue IMO, but we also need to admit that free markets can’t fix every problem. If both supply and demand reach asymptotic limits before they intersect one another, relying on the price mechanism to bring the market into balance is a foolhardy.