Guest Post by John Stossel
Officials in states hit by Hurricane Florence are on the lookout for “price gouging.”
People who engage in “excessive pricing” face up to 30 days jail time, said North Carolina’s attorney general. South Carolina passed a “Price Gouging During Emergency” law that imposes a $1,000 fine per violation.
“Gouging” is an issue during every disaster because when supplies are short, some merchants raise prices.
These are “bad people,” said Florida Attorney General Pam Bondi angrily during a previous storm.
Bad people?
I thought Republicans were the party that believed the market determines prices.
“Gougers deserve a medal,” Nobel Prize-winning economist Milton Friedman once told me. That’s because higher prices are the best indicator of which goods people want most.
This is a hard concept for people to understand.
“They’re not heroes. They’re scabs who prey off the desperate,” wrote James Kirkpatrick in the comments after watching my latest video about this. “Only Stossel would praise greed,” added Paul Nadrotowski.
I don’t praise greed. Pursuing profit is simply the best mechanism for bringing people supplies we need. Without rising prices indicating which materials are most sought-after, suppliers don’t know whether to rush in food, or bandages, or chainsaws.
After Hurricane Katrina, one so-called gouger was John Shepperson of Kentucky. Watching news reports, he learned that people desperately needed generators.
So Shepperson bought 19 of them, rented a U-Haul, and drove it 600 miles to a part of Mississippi that had no electricity. He offered to sell his generators for twice what he paid for them. People were eager to buy.
But Mississippi police said that was illegal. They confiscated Shepperson’s generators and locked him up.
Did the public benefit? No. The generators sat in police storage (I suspect some cops took them home to use while Shepperson sat in jail).
Who will bring supplies to a disaster area if it’s illegal to make extra profit? It’s risky to invest in 19 generators, leave home, rent a U-Haul and drive 600 miles.
“Being moral is loading up supplies and donating them to people in need,” a person named Meirstein wrote on my YouTube page.
Yes, but in real life, not enough people do that to satisfy the needs of thousands of desperate people.
You can make a law against someone like Shepperson making extra profit, but you can’t force apathetic people to bring in supplies.
Prices are not just money. They are information.
They are what signal entrepreneurs to go into a given business. Rising prices are the clearest indicator of what most customers want.
Without extra profit, suppliers tend to stay home. That’s easier and safer.
If prices don’t shoot up during disasters, consumers hoard. We rush to gas stations to top off our tanks. Stores run out of batteries because early customers stock up. Late arrivals may get nothing.
America should have learned that when Richard Nixon imposed price controls on gasoline. That gave us gasoline shortages and long gas lines. But politicians don’t learn.
Fortunately, kids who learn about free markets via the Stossel in the Classroom charity know better.
We ran a contest inviting students to write an essay or make a video about price gouging.
Some pointed out that price controls make it hard for people everywhere to get the goods they need.
“In modern day, you see countries like Venezuela suffer from the fact that their governments place price controls on all items,” said 17-year-old Annelise Kofod of Raleigh, North Carolina. She won the high school video award.
After researching prices and disasters, Maggie Hroncich of Grove City, Pennsylvania, winner of the high school essay contest, said, “actually, the price gougers are the moral ones.”
I won’t make claims about their morality. But I do know that allowing prices to rise, even sharply, is the best way to help desperate people get supplies they need.
As supplies rush in, prices quickly return to normal. We shouldn’t call it gouging. It’s just supply and demand.
The best thing “price police” can do in a disaster is stay out of the way.
The guy who went to New Orleans to sell generators was lucky he only lost his generators.
Why folks here and other sites say ,keep prepping,so,you do not need to pay a market disruption for needed goods and supplies.My guess is majority who run out of gas for their gennies kept em going 24/7 even though not needed to watch movies ect.Unless you are running say a local neighborhood soup kitchen in a emergency or say a med triage ec. you do not need to run all the time.I hope folks who are prepped if they can safely do help others,but,that tis like prepping voluntary but if safe in my opinion the right thing to do.
Healthcare: Now THAT’S price gouging.
Not only price gouging but not even listed prices so we as consumers can make choices in non emergency where we get our medical services from.
and to cover the overhead of about 5 non-paying patients for every one that does
Two options, for those courageous souls who break the shackles, WIP.
1. Faith group shared responsibility healtch care plans, + a low cost catastrophic umbrella policy. Chronic health challenged victims aside, understandably.
Another option:
Research Jud Anglin, and medical tourism possibilities.
The ignorant will scoff at entrusting a Doc or Surgeon in a foreign land, but reportedly, common major operations can be arranged by competent Drs. and hospitals at 40% of the cost, known upfront, for same procedures and costs in the U.S. and it’s insurance scam raping Americans must endure.
Do the research, if you’re interested in viable alternatives, and you can travel to receive treatment. Just sayin’…
And granted, not feasible in many cases. But, alt. options do exist for some adventurous patients wanting a lower cost alternative.
Thailand is one such destination, with state of the art equipment, facilities, and Drs.
…Even with airfare and travel/lodging costs factored in.
Almost everything we buy at “normal prices” ( from canned goods, sodas, bottled water, gasoline, clothing, shoes…etc) is marked up 300%+ for profit above the cost of producing–why not get what the buyer will pay?
If anything, maybe it will teach people to all prepare for potential emergencies. If you don’t want to spend $24 for a case of bottled water during a hurricane, then buy 6 cases at $4 each and keep them stored away in a corner or closet.
PS: in our “guest bedroom” in the basement, I have two stacks of 4 cases of bottled water each stack. I added a 4 foot x 2.5 foot piece of 3/4 inch plywood on top to level it, then draped the whole thing with a nice looking tablecloth over top and it looks just like a suitcase table for guests.
Would you top off your tank at $5.00 a gallon if you knew you probably had enough gas and knew that the price would be coming back down to under $3.00 after the emergency (sorry to upset those who are well above $3.00 normally)? NO. That’s all you need to know about how temporarily higher prices influence behavior in a positive way and help maintain supplies for those who really need them.
“Scarcity is a powerful force, and it leaves those in control of limited resources wielding great power.”
-Marin Katusa, Casey Research, July, 2012.
I’m with Stossel and Milton Friedman on this one.
Pam Bondi, Kirkpatrick, Nadrowtowski, and the Mississippi LEO’s have it wrong.
Shepperson saw an opportunity, put up his own money, made an investment with a goal of making a profit.
All the suppliers Shepperson paid benefited from his risk outlay and planning.
{Just described a SBO launching a new start up.}
His ‘customers’ would have benefited from his foresight and planning.
Instead, they chose to demonize him for capitalizing on a need he found, and filled.
He was brilliant, the ‘authorities’ are merely judgmental and hypocritical, claiming a moral high ground.
Stuff happens.
Be prepared.
If unprepared, and in need, and a seller has a solution, pay the price, and solve your problem.
If the price offered is unfair and cruel in your opinion, find another supplier with lower prices.
I believe those people who bitch about price gouging need to look in the mirror and
direct their angst at themselves, for letting themselves get forced into a position of few options.
Poor planning and unpreparedness is a cause, and it’s effects are lessons from the school of hard knocks.
My vehicle was on fumes the day after 9/11. I should have never let it get that way.
Gas prices went from $2 / gallon to $6 / gallon, simply on supply fears of shortage, and expected spike in demands.
I bitched about it, bad mouthed the Arab station owner, but didn’t think I had other options.
Needed gas. Couldn’t wait. Didn’t plan ahead.
Note to self:
Amazing how a dramatic social event can alter people’s minds, from normally logical, to a state of borderline panic and rash decisions.
Unfortunately, I see the potential for that happening on a massive scale when the SHTF in the U.S.
When? Who knows? But time is running short, and procrastination of prepping is foolish.
Stossel ends with a funny line: “The best thing “price police” can do in a disaster is stay out of the way.”
Government staying out of the way. Hahaha. That will never happen. Government feels it must control everything and everyone, for their own good, of course.
If they don’t “stay in the way,” then they wont be seen. And if they are not routinely seen, there is the chance that we might all start wondering why we need them in the first place, when we can clearly solve all of our problems on our own (especially if we have all of our stolen money back).
“People who engage in “excessive pricing” face up to 30 days jail time, said North Carolina’s attorney general. South Carolina passed a “Price Gouging During Emergency” law that imposes a $1,000 fine per violation.”
The government passes laws against gouging because it hates competition.
I withhold passing judgement but will tell a tale. After H. Ivan 2004 it took me three days to get back to my home. I was staying in my palatial office, and lived there for essentially 5 years. But when I was able to get home taking a detour 60 miles out of my way there was a man selling generators roadside on a country road; the main hwy 98 bridge was closed (to keep looters and no gooders out of my little suburban community) and the I-10 bridge was missing several sections.
The generators were brand x but I stopped and negotiated a deal for $700 or so. BUT what made it interesting was when I went inside the dude’s little trailer to pay for it, somehow, in the dealings, several hundred dollar bills went missing, all while we sat next to a table. Well, he was packing heat on his hip… and it got a bit tense whilst I argued with him that I already gave him all the cash. He hemmed and hawed and I began to sweat. After an antagonistic interlude the missing cash turned up between the cushions of his chair.
And months later I received a check from the State saying the man had engaged in price gouging. I had made no effort or attempts to make claims.
I was glad to get a refund but was more glad to be able to purchase a generator. end of story.
Let’s say you buy an extra large sized lot for your gas station, so you have a place to put a couple extra underground tanks so you can have more capacity in case of an emergency. The only way to actually pay for the added cost of that extra capacity is to charge more for it during an emergency. If you tried to do it any other time, you would lose sales because the customers would go to the cheaper gas station across the street who only has half the capacity you do and his property costs a lot less. But they call this gouging. So every gas station has tiny little tanks that run out in one day. It’s really not gouging at all, it is a well defined business model.
There you go using un-emotional logic. Don’t you know that ONLY EMOTIONAL RANTING is allowed following a disaster and when talking about price gouging?
In the early 90s we woke up Saturday morning to 18″ of snow, no power, trees down everywhere, etc. It was Thursday before I got out to a friend’s house to shower. One neighbor provided us with firewood, four other neighbors stayed with us each night–all of us piled up in the living room–we melted snow for water and gas grilled almost every meal beginning with whatever would spoil soonest.
A very early morning recently she woke me up because the fans in the bedroom went quiet; it woke her up. While she showered with a flashlight on the counter, I went outside, rolled out generator, ran an extension cord into the house and started the coffee. I’m not prepared for the end times, but I can at least survive a short term pile of crap on my plate. We can even load up and hook up and leave for a few weeks without needing assistance…if we can both get back home when it’s required.