Balkinization  

Monday, May 22, 2006

Price Gouging is Not a Disparate Impact Defense

Ian Ayres

In certain markets, disparate impact law prohibits policies that disproportionately burden protected groups -- unless those policies have a sufficient business justification.

Some people -- including some judges like Richard Posner -- have suggested that any policy which increases a firm's profits should satisfy the business justification requirement.

But in an article that has just been accepted by the California Law Review, I argue that policies which enhance profits by exploiting market power should not constitute a business justification.

Price gouging is not business justified -- even if greatly enhances a firms profits.

The article applies this idea to employment, but it grows out of work that I did as an expertwitness on a series of auto financing cases. The article discusses these cases and the arguments of three opposing experts: Richard Epstein, James Heckman and George Priest.

Comments:

Could we have an objective definition of "price gouging"? I must have skipped class the day it was covered in Econ 101... Good thing it didn't show up on the finals!

Ah, wait, I found it: "Gouging" consists of paying the market rate where somebody named Balkin thinks the market rate doesn't reflect the objective worth of what's being bought....

Well, you've got me, your opinions as to the worth of products or labor SHOULD outweight the market and fiduciary duties. Who could doubt that?
 

My bad, blamed the foolish idea on the wrong guy. Sorry, Balkin!
 

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