During the Hurricane Katrina clean-up, a man from Kentucky loaded 19 generators onto his rented U-Haul. Driving 600 miles to an area of Mississippi with no power, he tried to sell them. His price was double what he had paid.
A good idea?
The police confiscated the generators and placed him in jail for four days. One ABC News article said Mississippi’s Attorney General was cracking down on price gouging.
A politician would call the man from Kentucky a price gouger. An economist would say he was solving a shortage problem.
Anti-Price Gouging Laws
With Hurricane Matthew threatening the state of Florida, they activated their price gouging hotline. The law prohibits excessive price increases for “essential commodities” during a state of emergency.
Below, each of the blue states has a price gouging law:
Our Bottom Line: The Benefits of Price Gouging
After Hurricane Sandy devastated parts of my NJ township in 2012, the local gas station resembled this picture. Where they could find an open station, people waited on gas lines for as much as 3 hours:
You can see where I am going.
I suspect that NJ’s price gouging law helped to create the problem. After all, higher prices encourage producers to sell more gas. They work a little harder to find extra, they extend their hours and they buy generators in areas that tend to lose power. Meanwhile, higher prices encourage consumers to buy less. As a result, those of us at the back of the line have a chance of getting gas.
My sources and more: This excellent HBR article on price gouging gave some good background for assessing yesterday’s announcement from Florida. More broadly, this econtalk podcast on a just price made one of my morning walks fascinating and this ungated WSJ article added insight to the discussion.