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Chance Of Demagoguery: 100%

With Irene bearing down, I anticipate the post-storm winds coming out of our public officials’ mouths to equal anything the hurricane can produce.  Natural disasters are like Christmas for demagogues, and while no human can match New York’s Chuck Schumer, I expect some of New Jersey’s leaders, particilarly camera-hound Mary Pat Angelini, to give Chuck a good run for his money.

Of course the power will take longer to restore than the politicians think it should take.  Indignation will be expressed by people whose total knowledge of power systems consists of knowing how to flip a light switch.  But the main thing to hyperventilate about will be “price gouging”.  I’m sure our leaders will soon announce some sort of “zero tolerance” policy against anyone “taking advantage” of the expected shortages of certain goods, thus guaranteeing that the shortages will last much longer than they needed to. 

I wrote about this last winter in response to Rible and Angelini’s bloviating about the high cost of getting a tow truck to operate in a blizzard.  For those who didn’t see it, I re-publish part of it here:

Perhaps no one is better than the great economist Walter E. Williams at explaining why “price gouging” in an emergency provides the greatest level of human comfort and safety possible under certain conditions.  In his 2005 column “The Role of Prices” he states:

The fallout from Hurricane Katrina has featured a lot of ignorance and demagoguery about prices. Let’s look at some of it. One undeniable fact is that the hurricane disaster changed scarcity conditions. There are fewer stores, fewer units of housing, less gasoline and a shortage of many other goods and services used on a daily basis. Rising prices are not only a manifestation of these changed scarcity conditions, they help us cope, adjust and get us on the road to recovery.

 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.


Recovering from Katrina means resources will have to be moved to the Gulf Coast. I ask you, how does one get electricians, plumbers and other artisans to give up their comfortable homes and livelihoods in Virginia and Pennsylvania and travel to Mobile and New Orleans to help in the recovery? If you said pay them higher prices, go to the head of the class. Higher prices, along with windfall profits, are economic signals of unmet human wants. As such, they encourage producers to meet those human wants.

A few weeks later, in a column titled “Hurricane Evacuation Lessons” he says:

Hurricane Rita provided us with another evacuation lesson as millions sought to leave Houston and Galveston. Gasoline stations ran out of gas leaving hundreds of motorists stranded. Many abandoned their cars. Police officers were deployed to carry gas to motorists whose tanks were empty. Texas authorities also asked the Pentagon for help in getting gas to stranded motorists. Much of the blame for the shortage rests at the feet of Texas Attorney General Greg Abbott, who recently ordered that penalties of up to $20,000 be imposed per incident of price-gouging. You say, “How come you blame Greg Abbott?” Let’s look at it. When the hurricane evacuation order came, there was an immediate change in the demand conditions for gasoline; namely, demand became much greater than the available supply. Retailers, in fear of prosecution by the attorney general, didn’t do what would have brought demand more in line with the available supplies of gasoline — raise prices.

 Suppose a family evacuating Houston chose to make a 146-mile drive to stay with relatives in Austin. Their car has a half a tank of gasoline — plenty to get to Austin — but just to be safe, they decide to fill up. What do you think they might do if they expected to pay $2.75 a gallon but when they got to the gas station they found the gas selling for $3.75? I bet they’d say, “The heck with that; we’ll fill up in Austin.” That’s wonderful; they’ve voluntarily made gas available for someone running out of gas. In my book, for a motorist who’s running on empty, gas available at $3.75 a gallon is preferable to gas being unavailable at $2.75 a gallon.

 Attorney General Abbott also threatened legal action against what he called “unconscionable pricing” by hotels. Take that same family. The husband might have said, “Honey, I don’t feel like driving all the way to Austin to stay with your mother and father; let’s rent a room.” When they get to the hotel, the rooms are no longer $75 a night but $150. The husband says, “Okay, I’ll put up with the in-laws.” That’s wonderful, too. They’ve made a room available for a family who has no other alternative.

Market allocation isn’t the only way to make sure people economize on resources that have suddenly become scarce. Texas officials resorted to pleading with motorists not to top off their tanks. Their pleas were ignored. What Texas officials could have done was to place anti-top off officers at every gas station to make sure people weren’t buying more gas than they needed to get to their evacuation destination. Texas officials also could have stationed hotel officers at every hotel. The job of the hotel officer would be to query potential guests as to whether they had nearby relatives or friends with whom they could spend a night or two. If they had relatives or friends within a reasonable distance, such as my example of the husband and wife with relatives in Austin, the hotel officer would tell them to hit the road. Would measures such as these have been preferable to rising prices or the unavailability of gas and lodging?


My gas tanks are full and I’m stocked up on beer and cigarettes so I should be ok.

Be safe everybody!

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