MANG2041 week 10 - essay 2 (1)
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Uni. Southampton**We aren't endorsed by this school
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BUSINESS MANG6279
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Management
Date
Dec 20, 2024
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3
Uploaded by ConstableSummerCrane49
ESSAY 2 – Should Price Gouging Be Illegal?The question of what is right and wrong in society has been a central focus of mankind’sthought for centuries. Our nature as social beings (Aristotle 2000) means that we often comeinto conflict, in terms of our actions and desires, and this means that we have to work toresolve these conflicts. Some people may say that one action is right, and others will think itis wrong. All different societies have different ethical codes, and different people havedifferent beliefs. One example would be bribery – some accept it, some do not, and it is noteasy to say who is right. Another example is slavery, which was practiced in the past, but isnow seen as wrong, even though it is still used in some places (Crane 2013). Anotherexample is price gouging, which is the topic of this essay. This essay will outline argumentsfor and against price gouging, and then will reach a conclusion at the end.Ethics is about values. Some people say that ethics is a kind of formalisation of morality(Crane et al 2019), while others will hold a different view, and will say that ethics is quitedifferent from morality, e.g. Nietzsche who was a German philosopher working in the 19thcentury, who eventually went mad (Wikipedia). Values are at the heart of what we believe,and therefore influence how we live and work. Ethics and values are becoming moreimportant in business, as businesses seek to connect to a new generation. In today’s world,people care a lot about values and ethics, and tend to buy more things from businesses theysee as ethical. This is why fair-trade products are so sought after. Price gouging connects tovalues and ethics, and so therefore is a really important topic.So, should price gouging be illegal? Or should it be legal, and just accepted? How would thelaw be enforced? Who is to say whether it is right or wrong? But first, what is price gouging?Price gouging is when the price goes up. It is seen as wrong because sometimes peoplecannot afford the new price. If the price is too high, how are people going to afford it? Thereis a limit to how much we can spend of something, so if the price goes up too high, it mightnot be possible to buy. Some rich people might be able to buy whatever they like, but thisessay is written from the perspective of an ordinary person, who is not rich, and so cannotbuy things if price gouging takes place. According to the stakeholder salience model (Mitchelet al 1997), it is clear that customers are important stakeholders. You might even say they aredefinitive – which means they have power (the ability to influence people), urgency (a timesensitive need or an important one), as well as legitimacy (i.e. they are right and proper: thesort of people we would expect businesses to consider). You should always care about yourdefinitive stakeholders, and if I was a manager, I would care about them and act in theirinterests. In class we look at an example, which showed it is not always easy to know whatthe status of a stakeholder is, so being a manager clearly isn’t easy. This disagreement is alsopossible with moral intensity (Jones 1991).On the other hand, who is to say that it should be illegal? What gives you, or me, or anyonethe right? Maybe the government has the right, but the government can make mistakes too. Inactual fact, it may be that price gouging is beneficial because it communicates that a productis needed somewhere. If it starts to rain a lot, and the price of umbrellas goes up, then otherpeople will start making and selling umbrellas, so all the people who want umbrellas can buythem (this is the basic idea of Matt Zwolinski, who is a philosophy professor at the Universityof San Diego, in California). If this happens you will have too many umbrellas, and some
may end up in landfill, which is bad for the environment – another important value. Ifsomeone makes sustainable umbrellas they may sell more, because the demand forsustainable products is high and will get higher. But this has nothing to do with pricegouging.On the other hand, we looked at the theory of John Stuart Mill in class. John was a utilitarian,which means he wanted more happiness. If people can afford the things they want, they willbe happier, therefore John would say that make price gouging illegal. Even if the shop owneris unhappy, there are more customers, and they will be happier, so the happiness of thecustomers outweighs the happiness of the shop owner (like when you pull the lever to kill oneperson). Utilitarianism says pull the lever and don’t price gouge.However, there is conflict. Not everyone agrees (Budd & Bhave 2010). There can be conflictin the workplace and in society as a whole, as I noted above. One conflict is that Adam Smithdisagreed with Mill. Smith believed that the invisible hand of the market would ensuresocietal prosperity, so even if it feels bad that there is price gouging, don’t worry – the marketwill take care of everything, and people will benefit from it in the long run, especially theshop keepers.Take drugs. If I am ill, I need drugs (not illegal drugs, medical drugs from the hospital). Insome countries people pay for drugs themselves, which is bad as it means the poor cannotafford them. If there is price gouging in drugs, there is a serious harm. In this case it is hard tosee how the invisible hand of the market could confer any benefit. If someone dies becausethey cannot afford medication, that they could easily have afforded if price gouging wereillegal, then there is no use saying to them “oh, don’t worry, the invisible hand of the marketworks for the benefit of everyone”. Smith did not think of that, though he was writing in thepast when there weren’t so many medical drugs, so it might have been harder for him to thinkabout it. There also wasn’t an NHS, which came in in 1945 with Clement Attlee’s labourgovernment (it was opposed by the Tories, who always want to work for the rich, andprobably love price gouging). With no NHS, there are no examples of people getting thetreatment they need for free, so it would have been hard for Smith to know how bad that is(it’s easier to imagine something if you’ve seen it). Nevertheless, if people die, that’s bad andshould be avoided if possible, which seems to indicate that price gouging should be illegal.However, on the other hand, not everyone will agree to this. Some people really admireSmith, and hold up his perspective to this day (the business school at Glasgow University iscalled the Adam Smith business school which shows Smith is still relevant to ourcontemporary world). Ultimately, this debate looks set to run and run, because it is hard tosay who is right and who is wrong. Like many issues, there are two sides to it, or even more.Both sides have good and bad points, and ultimately it is difficult to know which side isstronger. Even if you think you know, it is probably always best to reserve judgement. If youthink all your beliefs are true, people will say you are arrogant, and they will disagree withyou. So, if you really want to persuade people, it is best to say that you don’t know whichside is best. Price gouging is a very topical issue because prices are always going up. Thismeans we will probably talk about it more and more over time, and maybe one day we willagree. As I said, values are becoming more and more important, and we are also becomingmore and more connected through social media (which can be bad – see Jeske and Shultz2016). Because we are connected in today’s technological world, we can talk more easily, so
perhaps there will be a breakthrough on price gouging as people can communicate more andmore, and people care more and more about business and CSR and ethical values. So, inconclusion, who is to say whether price gouging should be illegal?ReferencesAristotle. 2000. Nicomachean Ethics(trans. Irwin), Indianapolis, IN: Hackett.Budd, J.W. and Bhave, D., 2010. The employment relationship. Sage handbook of humanresource management, pp.51-70.Crane, A., 2013. Modern slavery as a management practice: Exploring the conditions andcapabilities for human exploitation. Academy of Management Review, 38(1), pp.49-69.Crane, A., Matten, D., Glozer, S. and Spence, L., 2019. Business ethics: Managing corporatecitizenship and sustainability in the age of globalization (5thedition).Oxford UniversityPress.Jeske, D. and Shultz, K.S., 2016. Using social media content for screening in recruitment andselection: pros and cons. Work, employment and society, 30(3), pp.535-546.Jones, T.M., 1991. Ethical decision making by individuals in organizations: An issue-contingent model. Academy of management review, 16(2), pp.366-395.Mill, J. S. 2015. Utilitarianism. Cambridge, England: Cambridge University Press.Mitchell, R.K., Agle, B.R. and Wood, D.J., 1997. Toward a theory of stakeholderidentification and salience: Defining the principle of who and what really counts. Academy ofmanagement review, 22(4), pp.853-886.Smith, A. 1982. The Wealth of Nations. London, England: Penguin Books.Wikipedia–FriedrichNietzsche(accessedSept25th2-19)www.en.wikipedia.org/wiki/Friedrich_NietzscheZwolinski, M., 2008. The ethics of price gouging. Business Ethics Quarterly, 18(3), pp.347-378.