So even if the government were okay with "market adjustments" on basic goods, there would still be this risk of stores getting looted/destroyed because people are so angry at how quickly prices increased.
Businesses are much less emotional. Most are just going to adapt to the new price.
Instead of talking about "inflation", talk about "cost uncertainty". That should make clear how a complex society with long production chains can't really deal with it. That also includes households, who have much less capability for planning than firms and really need to know what their bills will be and how much things will cost when making decisions.
https://www.academia.edu/43768978/NOTES_ON_COSTS_AND_CONSEQU...
It doesn't, though.
> If you are a business, you need to make long term production plans, and when you have no idea what the costs will be, that severly disrupts the production process
Sure, but that's the effect or unpredictable price changes, not inflation. USD is inflationary, Bitcoin is deflationary, but future (short or long term) prices of other goods and services in USD have a lot less uncertainty than those in Bitcoin. Inflation is not at all the same thing as difficulty projecting future prices.
Price gouging is a legal term for people/retailers taking advantage of shortages or spikes in demand by charging well over market price for basic necessities.
Allowing price gouging is allowing selling at the current market price.