Price Gouging During Emergencies | Are There Benefits?

FIRST, here is the article Larry Elder referenced in the audio above regarding the Chicago fire: “Lessons from the Chicago Fire.” WALTER WILLIAMS gives an excellent example of the benefits of price “gouging” (supply and demand) in helping families:

…Here’s a which-is-better question for you. Suppose a hotel room rented for $79 a night prior to Hurricane Katrina’s devastation. Based on that price, an evacuating family of four might rent two adjoining rooms. When they arrive at the hotel, they find the rooms rent for $200; they decide to make do with one room. In my book, that’s wonderful. The family voluntarily opted to make a room available for another family who had to evacuate or whose home was destroyed. Demagogues will call this price-gouging, but I ask you, which is preferable: a room available at $200 or a room unavailable at $79? Rising prices get people to voluntarily economize on goods and services rendered scarcer by the disaster.

After Hurricane Katrina struck, gasoline prices shot up almost a dollar nearly overnight. Some people have been quick to call this price-gouging, particularly since wholesalers and retailers were charging the higher price for gasoline already purchased and in their tanks prior to the hurricane. The fact of business is that what a seller paid for something doesn’t necessarily determine its selling price. Put in a bit more sophisticated way: Historical costs have nothing to do with selling price. For example, suppose you maintained a 10-pound inventory of coffee in your cupboard. When I ran out, you’d occasionally sell me a pound for $2. Suppose there’s a freeze in Brazil destroying much of the coffee crop, driving coffee prices to $5 a pound. Then I come around to purchase coffee. Are you going to charge me $2 a pound, what you paid for it, or $5, what it’s going to cost you to restock your coffee inventory?

[….]

Politicians of both parties have rushed in to exploit public ignorance and emotion. Last week Illinois Gov. Rod Blagojevich (Democrat) threatened to prosecute gas companies. Texas Attorney General Greg Abbott (Republican) is threatening legal action against what he called “unconscionable pricing” by hotels. Alabama Attorney General Troy King (Republican) promises to vigorously prosecute businesses that significantly increase prices during the state of emergency. The Bush administration has called for the Justice Department and the Federal Trade Commission to look for evidence of price-gouging, and Congress plans to hold hearings on oil company “price-gouging.”

There’s an important downside to these political attacks on producers. What about the next disaster? How much sense does it make for producers to make the extra effort to provide goods and services if they know they risk prosecution for charging what might be seen as “unconscionable prices”? Politicians would serve us better by focusing their energies on tax-gouging.

Ben Shapiro and Brian Whitman Discuss Hurricane Katrina Anniversary

(You have to know a little bit about the furor over Katrina and Bush hatred to get the following.)

I received an email a many years ago noting that because of the Federal Governments response to Katrina in New Orleans… then President Bush showed his dislike for black people. In other words, he is racist.

Following through with that line of thinking then, can we conclude — then — that because Des Moines was flooded and Obama lagged in getting help to the flooded portion of this state… does Obama dislike white people, thus, being racist himself?

Where are the Hollywood celebrities holding telethons asking for help in restoring Iowa and North Dakota and helping the folks affected by the floods? Where is good old Michael Moore?

Why is the media NOT asking the tough questions about why the federal government hasn’t solved this problem? ….

….Asking where the FEMA trucks and trailers and food services are?

Why isn’t the Federal government moving Iowa people into free hotels in Chicago and Minneapolis ?

When will Spike Lee say that the Federal government blew up the levees that failed in Des Moines?

Where are Sean Penn, Bono, and the Dixie Chicks?

Where are all the looters stealing high-end tennis shoes, cases of beer and television sets?

When will we hear Governor Chet Culver say that he wants to rebuild a “vanilla” Iowa like Mayor Ray Nagin wanted to rebuild “chocolate” New Orleans… because that’s what God wants? [As Nagin said]

Where is the hysterical 24/7 media coverage complete with reports of shootings at rescuers, of rapes and murder?

Where are all the people screaming that Barack Obama hates white, rural people? My God, where are Angelina Jolie and Brad Pitt, Oprah, and Ray Coniff Jr?

How come you will never hear about the Iowa flooding ever again? Where are the gov’t. bail out vouchers? The government debit cards?