Lee Friday – April 23, 2020
Ontario Premier Doug Ford said “he was ready to “throw the book” at those who hiked prices on essential goods by five or ten times their usual value.” Ford said:
“I’m calling them out: Pusateri’s. I heard that they’re selling hand wipes for $30 a tin? That’s disgusting. Absolutely disgusting that a company like that would be selling hand wipes for that cost. … It’s beyond belief … Nothing gets me more furious than someone taking advantage and price gouging the public that are in desperate need of these items.”
Talk about the pot calling the kettle black! Let’s consider the circumstances of Pusateri’s price gouging, but let’s also consider the circumstances related to the price charged by the government for its so-called universal health care system. This seems appropriate in light of Ford’s concern about providing adequate health care resources during the COVID-19 pandemic which led to Pusateri’s price gouging.
Pusateri’s charged $30 for Lysol disinfecting wipes, which is roughly ten times the pre-panic price.
In contrast, as I have written before, the cost of socialized health care in Canada in 2018 – approximately $4,389 per capita – was twenty-three times the cost of private health care in the early 20th century, measured by how long a person must work to pay for health care. And that’s a conservative estimate.
At this point, someone might say “Ah, but the high price of health care is not caused by the government’s monopoly. Rather, it reflects the rising cost of modern medical technology.” This argument is unconvincing. There are many complex products — e.g. computers — where competition and technological innovation produce lower prices.
The government’s price gouging is more than twice as bad as Pusateri’s price gouging. Unfortunately, government price gouging – through taxation – is hidden from view because health care is free to consumers at the point of service, whereas consumers must pay Pusateri’s directly for their disinfecting wipes. Because the phrase “price gouging” has ominous implications, it should only be used to describe a situation where people are forced to pay a specified price, such as when the government forcibly taxes people for health care.
This is not the case with Pusateri’s, which cannot legally force people to buy disinfecting wipes. If no one buys disinfecting wipes from Pusateri’s, they will eventually lower their price. On the other hand, if people voluntarily purchase the wipes, Pusateri’s higher profits will prompt other retailers and manufacturers to increase the supply of wipes to meet the increased demand, which also leads to lower prices. This is the effect of competition in an unhampered market.
It is equally important to remember that if you pay $30 to Pusateri’s, you know for certain that you are getting what you pay for – the disinfecting wipes. Not so with the government’s socialized health care, as revealed by a 2014 study by the Fraser Institute:
Justices of the Supreme Court of Canada have noted that patients in Canada die as a result of waiting lists for universally accessible health care.
Our analysis estimates that between 25,456 and 63,090 (with a middle value of 44,273) Canadian women may have died as a result of increased wait times between 1993 and 2009.
As we can see, Canadians have universal access to waiting lists, but not to actual health care. Thus, socialized health care is best described as a government scheme which forces you to purchase a product which you may not want or need, for a price which the government dictates, raises, and confiscates annually. Then, the government often refuses to deliver the product without refunding your purchase price, while forbidding you from purchasing a replacement product from competitors elsewhere within its jurisdiction.
Therefore, Ford’s holier-than-thou complaint should not be directed toward Pusateri’s,1 but toward the government itself: “It is absolutely disgusting that the government forbids competition and lines the pockets of highly paid bureaucrats by forcibly price gouging the public to pay for health care that is often denied to them when they desperately need it.”
Anyone with a rudimentary understanding of economics can see that Ford’s diatribe reveals a political double standard. Understanding the economics of so-called price gouging in the private sector requires us to turn a deaf ear to politicians. Instead of complaining about price gouging and empty store shelves, we should learn how market participants filled those shelves in the first place – before the onset of panic buying. This will enable us to consider so-called price gouging – and the government’s response to it – in proper context. I promise you that young teenagers can easily understand these basic economic principles, which is probably why the subject matter is not properly taught in government schools. After all, we can’t have all those graduates questioning government policies.
It is therefore ironic that the government’s school closures present a golden opportunity for parents to educate their own children, including the study of basic economic principles, which is not a difficult task, even for the younger ones.
Image credit – Eric Parker via flickr
- Pusateri’s – perhaps under the threat of punishment from the government’s price gougers – issued an apology and promised refunds to customers who voluntarily paid the higher price.