Supply and Demand

Take a look on craigslist at the Northern Virginia and DC area housing section. You'll notice that many people have put up their house or apartment for a few nights around the inauguration. No central planner told them to rent out their home for a day or two. Regular people saw an opportunity for profit from the increased demand that hotels could not satisfy. The markets work like this everyday for almost anything you buy. If we outlawed "price gouging" this new supply of rooms would not be available, and a visiting family might decide to buy two rooms instead of one. Supply and demand at work. Laws against "price gouging" would not change how visitors to the inauguration value a room near DC. However, such a law would block the signal, and the price of a room would bear little relation to how people value it. With no restrictions on pricing, the supply increases, more people get what they want, and those that place a high value on a room can get one. Prices serve as signals every single day, and if policy blocks those signals there are clear repercussions. So, when you want the government to set prices for something, think about this example of a market at work.