I posit that only the economically ignorant support price regulations, i.e., price-gouging measures, after natural disasters such as hurricanes where items such as plywood typically see highly increased prices. The market will work most efficiently when the invisible hand is allowed to pimp slap the man who has just lost his beach house. What say you? This was a topic in Becker/Posner's "Uncommon Sense", btw. Not surprisingly, they were against price controls. At least one of them, iirc.
Price "gouging" in situations like that help to properly allocate the resources that are available and provide a large incentive for outside resources to flow to the area. Why would someone in Nebraska drive to Alabama to sell goods if they were mandated to sell at a pre-disaster price. It would be economically unfeasable for them to make the trip. However, at the higher prices, it becomes worth the trip, bringing much needed additional resources to the area. In addition, the resources already available in the the area are better allocated with the higher prices, which helps to stop hoarding and allows more people access to those resources. Besides, the market price is whatever consumers are willing to pay - it's not "gouging" if someone is willing to part with their money for it, regardless of their need for that item.
I'm pretty much in agreement with Ag on this one. However, I guess a blanket statement that "No" rules should apply would make me uncomfortable. With plywood and shingles I really don't have a problem with the market taking its course and was encouraged during a recent hurricane to see contractors loading up with plywood in Lewisville headed for the Gulf. Maybe on things like insulin I'd have a little different feeling but expect that in such instances folks with supplies in hand would mostly behave ethically.
Thomas Sowell, my favorite economist, covered this brilliantly when Florida got hammered in 2004. The Link
I like Sowell's argument, but, he never directly mentions water in his article. Hotel rooms, ice, plywood, and gas are all non-essential items for survival, would he feel the same way for price controls if the item is a matter of life or death?
Folks in Tennessee might even load up a car full of water, drive it to the affected area, and give it away at a price of zero, which would also drive the price down as there would suddenly be an increase in supply.
Of course they might...Americans tend to be very charitable people... However, the monetary incentive will bring additional resources from the folks who aren't as charitable... And in the aggregate, which is what we're talking about, the monetary incentive tends to be quite strong...
