Why Is This Price Gouging 856

There's no simple answer to this question. Tied up in it are a whole collection of legal, ethical, and cultural issues.

There is a cultural idea, which is to some extent supported by law as well, that the cost of "public services" or "public utilities" should be controlled not only by the law of supply and demand, but also by what people can afford. For example, the gas company might be able to increase their net profit by doubling the cost of gas during the winter, but by doing so they'd force an awful lot of people to choose between freezing to rest and starving to rest. Some things, such as natural gas for heating, are obviously essential public services; others, such as plasma televisions, obviously aren't, and there's some grey area in the middle.

Another issue is whether the consumer has "already paid" at least in part for the goods or services being offered, and therefore has some right to demand that it be offered at a price the public can afford. For example, utilities have advantageous access to the public way (cables and pipes run over or under public property), and the citizenry *owns* that public way and pays for its maintenance through taxes, so in exchange for that advantageous access the utilities is expected not to place their desire for profits ahead of their obligation to serve the citizenry. Another example, most of the drug companies benefit from government funding, tax breaks, etc. Those advantages mean that they are not doing business on a purely free-market model, so it would be unreasonable for their pricing to be based on a purely free-market model.

The issue of drug pricing leads into the question of "public good." It is generally considered in the public's interest for all people, not just rich people, to be able to afford to stay healthy. This is both because we have an ethical obligation to help our fellow man and because healthier people are more productive contributors to society and less of a drain on society. One of the roles of government is to ensure that individuals' and corporations' actions are in the public good, including perhaps limiting prices on essential items to ensure that they are affordable. I suppose this may be related to the "public services" argument put forth above. Perhaps drug companies are providing a public service?

There is an ethical principle to which some people subscribe that high profits can themselves be unethical. People who subscribe to this principle believe that allowing "what the market bear" to be the only control on prices is not only not value-neutral, but is in fact unethical. Jewish law, for example, codifies this belief and limits the profit that a merchant can make on his wares to 1-6 of the cost of producing them (how this applies to people who work for others as opposed to producing wares to sell themselves is an interesting question which is far too complicated to go into here).

The belief that high profits can be unethical frequently goes hand in hand with the belief that a pure free-market economy causes an ever-growing gap between the rich and poor, and that such a gap is a bad thing. These are not universally held beliefs.