Skip to comments.Price Gouging During a Natural Disaster
Posted on 10/24/2018 11:22:22 AM PDT by Kaslin
Thirteen states -- Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Mississippi, New York, North Carolina, South Carolina, Tennessee, Virginia and West Virginia -- have enacted laws to combat what is seen as price gouging in the wake of natural disasters. Price gouging is legally defined as charging 10 to 25 percent more for something than you charged for it during the month before an emergency. Sellers convicted of price gouging face prison terms and fines.
Price gouging in the wake of natural disasters is often seen as evil exploitation by sellers to rip off desperate customers. Let's hold off on that conclusion until after you give thought to some very important questions. First let's see what we can agree upon.
When a natural disaster occurs or is anticipated, supply conditions change. There is going to be less of what people want and need. Under such conditions, what actions are consistent with the public good? My answer is that people should voluntarily use less of everything and waste nothing. That would include economizing on water, gasoline, food and anything else necessary for survival. How about an example?
Take the case of a hurricane like Florence. Let's assume that evacuation 200 miles or so inland would guarantee safety for North Carolinians. Say the Jones family's car has three-quarters of a tank of gas, more than enough to drive to safety. The Smith family's car has less than a quarter-tank of gas, which is not enough to drive away from danger. We can multiply this scenario by tens of thousands of families in the Joneses' condition and thousands of families in the Smiths' predicament.
Here's my question: Who should forgo purchasing gas in the storm-threatened area? My answer would be all those people who have enough gas to drive to safety -- people such as the Joneses. By not purchasing gas, they'd make more gas available for those who really need the gas in order to drive to safety, such as the Smiths. We might also ask how considerate and caring it would be to their fellow North Carolinians who desperately need gas for people who have enough to evacuate to purchase gas just to top off their tanks.
If people such as the Joneses won't consider the needs of their fellow man voluntarily, the North Carolina attorney general could station government officials at each gasoline station to determine who should be permitted to purchase gas. You say, "Williams, it would be sheer lunacy for scarce state resources to be used that way, especially in the face of a natural disaster!" I think you're right.
Another method would be for the governor, mayors and church and community leaders to admonish North Carolinians to purchase gasoline only if they really need it. That way, plenty of gas would be available for those with nearly empty tanks. You might say, "Come on, Williams. Aren't you being a bit naive thinking that would work?" You're probably right again.
What I think would make gas available to those who really need it are rising prices. Suppose the pre-hurricane price of gas was $2.60 a gallon. As the hurricane approaches, dealers could let the price rise to $4 a gallon. That would give families who have enough gas to evacuate incentive to voluntarily forgo purchasing gasoline. Their voluntary decision would make more gas available for people who desperately need it. By the way, gas available at $4 a gallon seems more preferable than gas stations shut down because they have sold out of gas at $2.60 a gallon.
You might reluctantly agree that allowing prices to rise during a natural disaster helps allocate resources, but that's not the intention of sellers who raise prices. They are in it for windfall profit. I say: So what? It's what their actions accomplish that's important -- namely, getting people to conserve during a natural disaster. Also, higher prices create incentives for suppliers of all kinds of goods -- such as plywood, bottled water, generators and repair services -- to pitch in to help to restore people's lives.
—there is no such thing as “price gouging”-—it’s called “the market”—
It’s perfectly fine to gouge.
Just make sure your next move will be out of state.
I think if they want to do something like this it would be better to tie it to the profit margin comparison between the replacement price the item was bought at prior and after. Otherwise they may find they cannot replenish stocks from out of state.
Only basing it on the price in the month prior doesn’t take into account the increased demand on the market as a whole which WILL raise prices even without attempts to gouge.
Yeah, supply and demand curves determine price and the most efficient distribution of resources. Of course I might become pee'od if it adversely effected the safety of my family.
Regarding The Market’s virtues -
Just because you can (immorally gouge profit during disaster crisis), doesn’t mean you should (abide by Golden Rule).
All he could do was grin.
Maybe you’ve never been in a hurricane.
I’ve never had much use for Pam Bondi down here since “stand your ground” with Travon Martin, but she’s going after price gougers like a growling dog.
You can’t take the emotional element out of this. Not one person in twenty, perhaps, can view the issue with cold rationality, the way Williams can.
Price gouging won’t help allocate resources: people view it as a one-time or in any case short-term purchase decision, and therefore less material than the immediate emergency need. A better way to allocate resources in public emergencies without price gouging would be rationing. Everybody shares the pain while the poorest are not shut out and no one is unjustly enriched.
It would more affect the safety of your family if you couldn't get a commodity you desperately needed because the commodity wasn't available at any price.
The people in one location buy up all the plywood and the stores will get none in until after the storm.
A man 400 miles away sees an opportunity, rents a flat bed truck with all the plywood it can carry and drives to the area. He starts to sell of the back of the truck and includes cost of truck rental, plywood, fuel and hotel room for last night with a 10% profit.
Should he be arrested for price gouging because his price is 40% above the prior price?
Charging 10 to 25% more simply makes it possible for the proprietor to fix their property which was likely damaged along with everyone else’s.
There’s always a Leftist busy-body out there trying to fix things that aren’t broken.
If they had addressed 500% mark-ups, I would have been willing to listen.
Actually, that is exactly the opposite of what Mr. Williams is arguing. The price is how you control allocation. If you raise the price enough, only folks who actually need it will buy. It is more immoral to artificially maintain current prices and thus make sure that it is allocated as inefficiently as possible.
Lets take gasoline for instance.
If a proprietor raised his prices 100%, that forces folks to think in terms of only buying what they really need.
If he charges the normal price, people will come in and fill their two or three cars and leave gas sitting in the tanks. When everyone does this, it can cause a shortage if replacement gas isn’t readily available.
Raising prices can have a reasoned decent outcome. People get to come to their own conclusion about how much they buy, but it likely won’t be as much. There will be gas for more people.
Yes, I agree and posted an example in the post after yours.
-just like a sister and a stepson who live in Florida already do---
so instead of “gouging”, they won’t sell at all.
And when the invisible hand of the market donates its storm profits to storm relief I will believe in that hand’s benevolence.