What I love about economics is that it can show that what seems harmful is actually good for society. It illuminates what common sense overlooks.
This is all covered in the eye-opening book “Defending the Undefendable” by economist Walter Block.
Most people call child labor an unmitigated evil. David Boaz of the Cato Institute and Nick Gillespie of Reason.tv say that’s wrong.
“If we say that the United States should abolish child labor in very poor countries,” Boaz said, “then what will happen to these children? … They’re not suddenly going to go to the country day school. … They may be out selling their bodies on the street. That is not an improvement over working in a t-shirt factory.”
In fact, studies show that in at least one country where child labor was suddenly banned, prostitution increased. Good economics teaches that as poor countries get richer and freer, capital investment raises the productivity of labor and child labor diminishes. There’s no shortcut through government prohibition — unless you like starvation and child prostitution.
What about price-gouging? State laws attempt to prevent people from charging “unconscionable” prices during emergencies.
“If I’m in the neighborhood of Hurricane Katrina,” Boaz said, “what I want is water and ice and generators. … If you are in Kentucky (and) you’ve got 10 generators in your store, are you getting up at 4 a.m. to drive all day to get to Louisiana to sell these generators if you can only sell them for the same price you can sell them for in Kentucky? No, you’re going to go down because … you can sell them for more.”
Also, if prices rise during an emergency, that’s a signal for people to buy only what they most need. That leaves more for everyone else. If the price remains low, an incentive to conserve is lost.