In the wake of Hurricane Harvey, Texas attorney general, Ken Paxton, is not shying away from using government intervention to prevent price gouging. In an interview with Fox News host Neil Cuvato, Paxton made it very clear that he would sue businesses that tried to price gouge.
“The fine for price gouging is up to $20,000.00 fine per occurrence and up to $250,000.00 fine per occurrence if it is a senior citizen,” Paxton said.
Many of Texas’ government officials are self described conservatives and they love to talk about free market economics — this includes Paxton. In a letter on August 7, 2017 in the second paragraph Paxton stated:
“ ‘Conspiring with others to prevent new distribution channels for goods and services is contrary to the free market and violates antitrust laws,’ said Attorney General Paxton. ‘Such interference should not be tolerated in the dental supply industry or any other. My office will continue to ensure that companies doing business in Texas have the opportunity to compete in a truly free market.’ “
To be clear, we agree with Paxton and we believe that he did the right thing here. We applaud his work in this instance, he did a very good job. In an economy that is fair for everybody, monopolies cannot be allowed to prevent new potential distributors from entering the market.
The problem is that Paxton’s position contradicts itself. Free market economics means that there is no government interference whatsoever. In a free market economy, the government doesn’t interfere to stop suppliers from conspiring with one another to prevent monopolies and trusts.
What is free market economics? According to investopedia free market economics can be defined as:
“the law of supply and demand, rather than a central government, regulates production and labor. Companies sell goods and services at the highest price consumers are willing to pay, while workers demand the highest wages companies are willing to pay for their services. A purely capitalist economy is a free market economy; the profit motive drives all commerce and forces businesses to operate as efficiently as possible to avoid losing market share to competitors.”
Later on in his interview with Cuvato, Paxton states: “Price gouging is obviously a bad business practice, but what we’re trying to do here is also make people more aware of the law.”
To be fair as Neil Cavuto points out, price gouging is a bad business practice. Consumers will remember the suppliers that tried to screw them over in the middle of a supply shock. The problem with free market economics here should become immediately apparent. Free market economies are not equipped to handle supply shocks like hurricane Harvey. When there is a sudden disruption in the supply chain, the government needs to step in to protect consumers from unfair prices in the time of a crisis.
Again, we absolutely believe that Paxton is correct: the government needs to step in and stop price gouging in the time of a crisis. He is doing very good work at this point in time concerning Hurricane Harvey. However, Paxton’s position on free market economics contradicts itself again. His free market philosophy doesn’t make room for him to stop local businesses from price gouging the hell out of Houstonians.
It needs to be said that self described free market conservatives like Paxton frequently don’t truly believe that the free market economy solves everything. The time has come for us to stop preaching the gospel of free market economics. Sometimes free market economies don’t fix themselves and they need the government to step in and fix them.
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