Hurricane Ida: How Government Is Getting in the Way of Relief Efforts


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Hurricane Ida has left in her wake all kinds of physical destruction. Power lines down, no electricity, roofs blown right off, floods, trucks overturned, trees down, and dozens killed.

She has also played havoc with economics.

In the aftermath of Ida, there have been long lines of people waiting to purchase generators, fuel, food, water, ice, and all sorts of other groceries and pharmaceuticals. But what is the economic significance of large queues? Anyone who has taken a course in microeconomics 101 can tell you: demand is greater than supply. And what, in turn, does that mean? It implies that prices are too low, below equilibrium, in any case.

Well, why don’t they just rise? Isn’t that what naturally occurs when demand exceeds supply? Is that due to “market failure” the bogeyman of left wing economists? Not a bit of it. Rather, this is the fault of government.

That is because we have anti-price gouging laws on the books; they are triggered whenever there is an emergency.

“We don't want people or business to illegally take advantage of this crisis,” says Louisiana Attorney General Jeff Landry:

Virginia Attorney General Herring agrees.

In the absence of anti-gouging laws, prices of all types of needed goods would rise. This would serve as a market signal

“Sadly, bad actors will take advantage of hurricanes and other natural disasters by raising prices on necessary goods just to line their own pockets,” Herring said. “No one should ever have to worry about paying more for things that they need when they are also worried about keeping themselves and their families safe.”

In New York, State Attorney General Letitia James sent out a warning to anyone considering raising prices.

“New Yorkers should be on the lookout for fraudsters who use natural disasters to take advantage of consumers,” said James. “It is illegal for retailers or vendors to charge grossly excessive prices for essential goods and services during a state of emergency.”

This sounds quite alright. Government to the rescue, and all that. But a moment’s thought will demonstrate that these anti-price-gouging initiatives stem from economic illiteracy.

What are the present motives for someone in Montana, Maine, or Minnesota to get into a truck and haul down to New Orleans a tankerful of greatly needed orange juice or gasoline?

There are only two of them: benevolence and self interest. We can readily rely on the former. We are hardwired for it by evolution. Posit that there were two tribes of human-like creatures a million years ago otherwise equal in every other way. However, in one of them (ours), if person A was sick, person B took care of him. Next week, person B fell ill, and person A administered to him. We survived. We’re here now, aren’t we? The other tribe lacked this genetic code for kindness and compassion and perished. They didn’t have within them this capacity.

There is no doubt that this motive will account for thousands, no, tens of thousands of people from all over the country, nay, all over the world, to come to the rescue of those afflicted by Ida.

But if we are to help the helpless, we must mobilize all human incentives, not just this one.

One benefit of the higher price is that consumers will share scarce goods. At quintuple the price, those at the beginning of the queue will leave some for those at the end of the line.

What about self-interest? In the absence of anti-gouging laws, prices of all types of needed goods would rise. This would serve as a market signal; it would be as if a gigantic sign appeared in the sky: “PROFITS CAN BE MAXIMIZED BY SELLING GOODS IN IDA AFFLICTED AREAS.” Everyone and his uncle would get on the gravy train, and act so as to alleviate the plight of the suffering by making a bundle. As Gordon Gekko said, “Greed is good!”

But isn’t this unfair to the buyers, those victimized by the much higher prices? North Carolina Attorney General Josh Stein certainly thought so when he sued a gas station for charging $9.99 per gallon during a pipeline shutdown.

The answer is, no, it is not unfair. It is part of the free enterprise system.

One benefit of the higher price is that consumers will share the scarce good. At quintuple the price, those at the beginning of the queue will leave some for those at the end of the line. At the non-gouged price, they would tend to hog it all up. Further, it is a market signal! When more and more entrepreneurs bring additional supplies to the beleaguered areas as a result of these “exorbitant” prices, they will tend to fall.

When hikers are lost in the wilderness, they call for help. They signal. They yell. These price gouging laws are akin to decibel controls: the lost hikers cannot cry out too loudly. They are limited to only mobilizing people who will help them on the basis of compassion, not greed and self-interest.

If we really want to help victims of Ida and other such emergencies, we should repeal all price gouging legislation.



* This article was originally published here

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