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Hurricane Sandy Demonstrates Stupidity Of Anti-Gouging Laws

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On October 27, as East Coast residents prepared for Hurricane Sandy, New Jersey Governor Chris Christie threatened "price gougers" with stiff penalties. As David Brown pointed out in Mises Daily on August 17, 2004, shortly after Hurricane Charley hit Florida, foul weather is when we need market prices the most. Capitalism needs more foul-weather friends, not fair-weather friends like Christie.]

 

In the evening before Hurricane Charley hit central Florida, news anchors Bob Opsahl and Martie Salt of Orlando's Channel 9 complained that we "sure don't need" vendors to take advantage of the coming storm by raising their prices for urgently needed emergency supplies.

 

In the days since the hurricane hit, many other reporters and public officials have voiced similar sentiments. There are laws against raising prices during a natural disaster. It's called "price gouging." The state's attorney general has assured Floridians that he's going to crack down on such. There's even a hotline you can call if you notice a store charging a higher price for an urgently needed good than you paid before demand for the good suddenly went through the roof. The penalties are stiff: up to $25,000 per day for multiple violations.

 

But offering goods for sale is per se "taking advantage" of customers. Customers also "take advantage" of sellers. Both sides gain from the trade. In an unhampered market, the self-interest of vendors who supply urgently needed goods meshes beautifully with the self-interest of customers who urgently need these goods. In a market, we have price mechanisms to ensure that when there is any dramatic change in the supply of a good or the demand for a good, economic actors can respond accordingly, taking into account the new information and incentives. If that's rapacity, bring on the rapacity.

 

Prices are how scarce goods get allocated in markets in accordance with actual conditions. When demand increases, prices go up, all other things being equal. It's not immoral. If orange groves are frozen over (or devastated by Hurricane Charley), leading to fewer oranges going to market, the price of oranges on the market is going to go up as a result of the lower supply. And if demand for a good suddenly lapses or supply of that good suddenly expands, prices will go down. Should lower prices be illegal too?

 

In the same newscast, Salt and Opsahl reported that a local gas station had run out of gas and that the owner was hoping to receive more gas by midnight. Other central Florida stations have also run out of gas, especially in the days since the hurricane smacked our area. Power outages persist for many homes and businesses, and roads are blocked by trees, power lines, and chunks of roofs, so it is hard to obtain new supplies. Yet it's illegal for sellers of foodstuffs, water, ice, and gas to respond to the shortages and difficulty of restocking by raising their prices.

 

If we expect customers to be able to get what they need in an emergency, when demand zooms vendors must be allowed and encouraged to increase their prices. Supplies are then more likely to be sustained, and the people who most urgently need a particular good will more likely be able to get it. That is especially important during an emergency. Price gouging saves lives.

 

What would happen if prices were allowed to go up in defiance of the government?

 

Well, let's consider ice. Before Charley hit, few in central Florida had stocked up on ice. It had looked like the storm was going to skirt our part of the state; on the day of landfall, however, it veered eastward, thwarting all the meteorological predictions. After Charley cut his swath through central Florida, hundreds of thousands of central Florida residents were unexpectedly deprived of electrical power and therefore of refrigeration. Hence the huge increase in demand for ice.

 

Let us postulate that a small Orlando drug store has ten bags of ice in stock that, prior to the storm, it had been selling for $4.39 a bag. Of this stock it could normally expect to sell one or two bags a day. In the wake of Hurricane Charley, however, ten local residents show up at the store over the course of a day to buy ice. Most want to buy more than one bag.

 

So what happens? If the price is kept at $4.39 a bag because the drugstore owner fears the wrath of State Attorney General Charlie Crist and the finger wagging of local news anchors, the first five people who want to buy ice might obtain the entire stock. The first person buys one bag, the second person buys four bags, the third buys two bags, the fourth buys two bags, and the fifth buys one bag. The last five people get no ice. Yet one or more of the last five applicants may need the ice more desperately than any of the first five.

 

But suppose the store owner is operating in an unhampered market. Realizing that many more people than usual will now demand ice, and also realizing that with supply lines temporarily severed it will be difficult or impossible to bring in new supplies of ice for at least several days, he resorts to the expedient of raising the price to, say, $15.39 a bag.

 

Now customers will act more economically with respect to the available supply. Now, the person who has $60 in his wallet, and who had been willing to pay $17 to buy four bags of ice, may be willing to pay for only one or two bags of ice (because he needs the balance of his ready cash for other immediate needs). Some of the persons seeking ice may decide that they have a large enough reserve of canned food in their homes that they don't need to worry about preserving the one pound of ground beef in their freezer. They may forgo the purchase of ice altogether, even if they can "afford" it in the sense that they have $20 bills in their wallets. Meanwhile, the stragglers who in the first scenario lacked any opportunity to purchase ice will now be able to.

 

Note that even if the drug store owner guesses wrong about what the price of his ice should be, under this scenario vendors throughout central Florida would all be competing to find the right price to meet demand and maximize their profits. Thus, if the tenth person who shows up at the drugstore desperately needs ice and barely misses his chance to buy ice at the drugstore in our example, he still has a much better chance to obtain ice down the street at some other place that has a small reserve of ice.

 

Indeed, under this second scenario—the market scenario—vendors are scrambling to make ice available and to advertise that availability by whatever means available to them given the lack of power. Vendors who would have stayed home until power was generally restored might now go to heroic lengths to keep their stores open and make their surviving stocks available to consumers.

 

The "problem" of "price gouging" will not be cured by imposing rationing along with price controls, either. Rationing of price-controlled ice would still maintain an artificially low price for ice, so the day after the storm hits there would still be no economic incentive for ice vendors to scramble to keep ice available given limited supplies that cannot be immediately replenished. And while it is true that rationing might prevent the person casually purchasing four bags of ice from obtaining all four of those bags (at least from one store with a particularly diligent clerk), the rationing would also prevent the person who desperately needs four bags of ice from getting it.

 

Nobody knows the local circumstances and needs of buyers and sellers better than individual buyers and sellers themselves. When allowed to respond to real demand and real supply, prices and profits communicate the information and incentives that people require to meet their needs economically given all the relevant circumstances. There is no substitute for the market. And we should not be surprised that command-and-control intervention in the market cannot duplicate what economic actors accomplish on their own if allowed to act in accordance with their own self-interest and knowledge of their own case.

 

But we know all this already. We know that people lined up for gas in very long lines during the 1970s because the whole country was being treated as if it had been hit by a hurricane that was never going to go away. We also know that as soon as the price controls on gas were lifted, the long lines disappeared, as if a switch had been thrown restoring power to the whole economy.

 

One item in very short supply among the finger-wagging newscasters and public officials here in central Florida is an understanding of elementary economics. Maybe FEMA can fly in a few crates of Henry Hazlitt's Economics in One Lesson and drop them on Bob and Martie and all the other newscasters and public officials. This could be followed up with a boatload of George Reisman's Capitalism: A Treatise on Economics, which offers a wonderfully cogent and extensive explanation of prices and the effects of interference with prices. Some vintage Mises and Hayek would also be nice. But at least the Hazlitt.

 

"Price gouging" is nothing more than charging what the market will bear. If that's immoral, then all market adjustment to changing circumstances is "immoral," and markets per se are immoral. But that is not the case. And I don't think a store owner who makes money by satisfying the urgent needs of his customers is immoral either. It is called making a living. And, in the wake of Hurricane Charley, surviving.

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We have those laws here in Florida too, and it's a good thing for the perpetrators, cuz if there weren't the option of turning these skumbaggz into the law I'd get together with my neighbors and trash the workplace or car/truck of anyone gouging during a hurricane or afterwards.

There's merchants, and there's pigs. For those that don't know the difference, let them get their jaw broke. That will educate them straight away.

In the old south they were called carpetbaggers, weasels that would gouge people in distress, profiting off their misery.

They deserve a long stay in an ICU, but a hefty fine and possible jail time will have to suffice for a second best.

Our anti-gouge laws were passed with overwhelming popular support. Floridians love those laws, and will turn in any bastard that violates it in a microsecond.

If you have a gas station and your price goes up 10 cents a gallon after a hurricane, you're in big trouble. And any claims of "increased costs" will be shoved down their throats by the judge.

 

Which basically means in the event of a disaster, there will be even LESS resources available to people. You are an economic illiterate.

 

Maybe Floridians are just dumb? Maybe that's why they got into the most trouble in the housing crisis.

 

You can't solve problems by price controls. You will just make resources less available to people and create a black market. The people will have to stand in line all day, then turn around and sell the gas for the real market value to whoever will pay.

 

Open, for one day in your life, either a book on history or a book on economics, please.

 

Obama is about to force the closure of a few hundred coal plants - you know those things those things that produce electricity. When you have power outages, you're going to find a way to blame cons, no?

Edited by hitops

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Poor nh, he can't take defeat. Typical loser.

 

The next person that "defeats" a single one of my arguments in this thread will be the very first, chump.

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Bump

 

Which basically means in the event of a disaster, there will be even LESS resources available to people. You are an economic illiterate.

 

Maybe Floridians are just dumb? Maybe that's why they got into the most trouble in the housing crisis.

 

You can't solve problems by price controls. You will just make resources less available to people and create a black market. The people will have to stand in line all day, then turn around and sell the gas for the real market value to whoever will pay.

 

Open, for one day in your life, either a book on history or a book on economics, please.

 

Obama is about to force the closure of a few hundred coal plants - you know those things those things that produce electricity. When you have power outages, you're going to find a way to blame cons, no?

 

Floridians know what the rest of the country's dumbass cons don't.

That anti-gouging laws increase the availability necessities, and make them more affordable.

They also prevent a lot of murders and hospitalizations of ass-holes that try to gouge ppl during hurricanes, since it provides a legal alternative.

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Floridians know what the rest of the country's dumbass cons don't.

That anti-gouging laws increase the availability necessities, and make them more affordable.

They also prevent a lot of murders and hospitalizations of ass-holes that try to gouge ppl during hurricanes, since it provides a legal alternative.

 

Lol... Considering how every basic economics textbook in the world states that an INCREASE in price will tend to increase the available supply of goods for sale, I would love to see you explain how using the threat of lethal force, either through government or through idiot mobs, to keep prices below the fair market value will somehow magically increase the availability of necessities. Good luck.

 

And it isn’t if we haven’t tried it your moronic way for a long time during disasters, but what have the results been? I always see stories about massive shortages of needed goods, rationing, people standing in line all damn day for a few gallons of gas, etc.. Obviously, your way is not working worth a damn for anyone other than the lucky first few people in line, now is it?

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Lol... Considering how every basic economics textbook in the world states that an INCREASE in price will tend to increase the available supply of goods for sale, I would love to see you explain how using the threat of lethal force, either through government or through idiot mobs, to keep prices below the fair market value will somehow magically increase the availability of necessities. Good luck.

 

And it isn’t if we haven’t tried it your moronic way for a long time during disasters, but what have the results been? I always see stories about massive shortages of needed goods, rationing, people standing in line all damn day for a few gallons of gas, etc.. Obviously, your way is not working worth a damn for anyone other than the lucky first few people in line, now is it?

 

 

 

Pulling statements out of your ass won't save your spanked argument.

Nobody agrees with you, imbecile. There's even popular laws everywhere that refute you.

You lose. You're an idiot.

Accept it.

Basic economics,einstein.

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Pulling statements out of your ass won't save your spanked argument.

Nobody agrees with you, imbecile. There's even popular laws everywhere that refute you.

You lose. You're an idiot.

Accept it.

Basic economics,einstein.

 

As I keep asking you, where has anyone in this thread "spanked" any argument I have made?

 

And just because something is popular, it does not prove it is correct. Hitler was extremely popular when he took power in Germany. Does that prove he was a great leader to you idiot libs?

 

Nobody agrees with you,

 

Oh really? Besides the article I have already posted, here is another brilliant economist that agrees with me, you damn imbecile- Link

 

Disaster Ignorance

By Walter Williams

 

Here's a which-is-better question for you. Suppose a New Jersey motel room rented for $125 a night prior to Hurricane Sandy's devastation. When the hurricane hits, a husband, wife and their two youngsters might seek the comfort of renting two adjoining rooms. However, when they arrive at the motel, they find that rooms now rent for $250. At that price, they might decide to make do with one room.

 

In my book, that would be wonderful. That decision would make a room available for another family who had to evacuate Sandy's wrath. New Jersey Gov. Chris Christie and others condemn this as price gouging, but I ask you: Which is preferable for a family seeking shelter — a room available at $250 or a room unavailable at the pre-hurricane price of $125? It's not the intention of the motel owner to make a room available for another family. He just sees an opportunity to earn more money. It was not the intention of the family of four who made do with just one room to make a room available for another evacuating family. They are just trying to save money. Even though it was no one's intention to make that room available, the room was made available as if intended. That's the unappreciated benefit of freely fluctuating prices. They get people to do voluntarily what's in the social interest — conserve on goods and services that have become scarce.

 

Gov. Christie told merchants that price gouging during a state of emergency is illegal because "during emergencies, New Jerseyans should look out for each other — not seek to take advantage of each other." Christie warned: "The state Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties." It's not just Christie who has threatened to prosecute sellers for raising prices. New York Attorney General Eric Schneiderman has launched an investigation into post-storm price increases after receiving consumer complaints about higher prices for everything from gasoline to hotel rooms.

 

Christie, Schneiderman and public officials elsewhere know better or have access to economists who inform them. But they're playing politics with people's suffering, emotionalism and economic ignorance. By the way, politicians would serve us better by focusing their energies on tax gouging.

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Pulling statements out of your ass won't save your spanked argument.

Nobody agrees with you, imbecile. There's even popular laws everywhere that refute you.

You lose. You're an idiot.

Accept it.

Basic economics,einstein.

 

Bump...

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Bump

 

Where did you go drano? I was away from the board from a few days and I was counting on you to keep bumping my thread while I was gone. Oh well...

 

Bump.

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