Is It Price Gouging, Or The Market Rationing Resources In The Face Of Spiking Demand?
As is usually the case, news of a natural disaster is followed by news of supposedly unscrupulous or unethical retailers raising prices. The latest example is Florida, where panicked citizens were buying up fuel at a rapid pace while fleeing the storm, or preparing to feed generators while they sit it out.
In the face of that spiking demand, at least one gas station raised their prices, sparking predictable complaints from the public at large:
According to the story, the gas station in question was charging a rate about $0.60/gallon higher than other fuel retailers in the area. Which makes me wonder why outraged customers didn’t just opt for a different station selling cheaper fuel instead.
But setting that aside, is there anything wrong with raising prices in the face of an emergency? It’s never popular with consumers – when are higher prices ever popular with consumers? – but as economist Walter Williams pointed out during the Hurricane Katrina disaster, “Rising prices get people to voluntarily economize on goods and services rendered scarcer by the disaster.”
Runs on provisions/services like water, fuel and lodging can quickly deplete supplies. Higher prices are a natural sort of market rationing that force individual consumers to buy less, leaving more supply available for a greater number of people.
A family that might have rented two motel rooms at a cheaper price might opt for only one at a higher price, leaving another room available for another displaced family. An individual might only by 10 cases of water at a higher price, instead of 20 at a lower price, leaving another 10 cases available for someone else. Someone buying fuel might opt to purchase less fuel at a higher price, thus leaving more fuel available for others.
Perhaps those, found facing some natural disaster, should ask themselves whether they’d like fuel and water and motel rooms to be available at higher prices, or not available at all at lower prices?Tags: hurricane isaac, price gouging