Saturday, September 13, 2008

Economic Ignorance and Price Gouging


President Bush Saturday said officials will ensure gasoline stations don't gouge customers after Hurricane Ike, but with some prices near $5 a gallon, some consumers were not so sure.
Dozens of iReport.com users complained of rising gasoline prices Friday and Saturday. Sean Kennedy, of Knoxville, Tennessee, took a photo of a Knoxville station displaying a $4.99 per gallon price for regular gasoline on Saturday.

The previous day, he said, he had bought regular gas at the station for $3.59 a gallon.
My thoughts: Pure economic ignorance. A complete lack of understanding of the concept of supply and demand.
Other Economists:

On Price Gouging by Donald Boudreaux
Prices are not set arbitrarily. They are what theyare for a variety of reasons. These reasons are summarizedby the two words “supply” and “demand.”...

Therefore, the fact that is unfortunate is not the higher price; it’s the underlying reality reflected by the higher price. That a natural disaster destroyed supplies and supply lines is indeed unfortunate. But this is the reality. Because, as Thomas Sowell reminds us, reality is not optional, we ought to deal with it as best as we can.

read the entire essay


Mitigating Disaster:Abolish FEMA and Let Gas Prices Rise by Dwight Lee

The higher prices we paid for gasoline reflected the fact that the hurricanes temporarily reduced gasoline supplies. After the hurricanes there was not as much gasoline available as consumers wanted at pre-hurricane prices.

Furthermore, more gas was suddenly needed along the Gulf Coast to bring in rescue personnel, evacuate the homeless, help clear the rubble, and get on with reconstruction efforts. The higher gas prices motivated tens of millions of drivers to conserve gasoline, allowing more to be available where it was badly needed. No matter how much sympathy we expressed for the hurricane victims, it is naïve to think we would have reduced our gas consumption much, if any, without a price increase.

read the entire essay

Anti-Gouging Hysteria by Jeff Tucker
In my own neck of the woods, I've never seen such hysteria about the supposed need to fill up tanks. There was a wild rush on gas stations, which of course produced shortages very quickly, and the prices responded as best they could. One wonders how much gas might have been left for those who really needed it if the anti-gouging police weren't on the patrol.

read the post
Fill-in-the-Blank Article About Price-Gouging Laws by Art Carden
Natural disasters wreak unspeakable human tragedy, and we can decide between interventionist policies that make things worse or noninterventionist nonpolicies that allow rapid recovery...

The important point, as always, is that the restrictions on price gouging harm precisely the people they are supposed to help...

A price control by any other name is still a price control, and price controls have always served to compound the miseries wrought by natural disasters.

read the entire essay

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