Posted by: Scott Lee | September 5, 2008

The Con that is PRICE GOUGING

Tropical Storm Hanna has caused a “state of emergency” in the Commonwealth.  That means many things including the anti-gouging law.

This is a huge con!  It ranks up there with “women’s right to choose”, “we evolved from monkeys”, and “Hillary would have been a great President!”  The anti-gouging law was implemented by well-meaning politicians with hearts bigger than their brains!  Anyone who understands economics and “supply and demand” would not vote for this silly law that only hurts those it tries to help!  However, could you imagine what it would be like for a politicians to argue against anti-gouging laws in today’s culture of “feel goodism” over facts!  If politicians were smarter and cared more about facts instead of their “political-hack careers”, we wouldn’t have things like anti-gouging laws.

First, what is it: The 2004 law prohibits the charging of “unconscionable” prices for goods and services deemed necessary. The measure of gouging is based on whether the price of goods or services “grossly exceeds” prices charged within 10 days before a disaster.

“Unconscionable” prices?  Who decides that? Shouldn’t the market decide, instead of some government entity?  “Grossly exceeds” prices charged?…this means another bureaucrat will be the arbiter of fairness! 

The market is perfectly designed to handle shortages and problems in emergency situations better than any “declared emergency” by some VP-running Governor!  These types of anti-gouging laws really prevent the customers and producers/suppliers from trading at mutually agreed upon prices!  These laws will promote shortages and discourage future productions (the law of unintended consequences!)

Wouldn’t it be better to have water, gas, and generators at higher prices in emergencies then have none at all?  Of course, but anti-gouging laws remove the incentive (profit) to bring more water, gas, and generators to the public. Why would anyone go through the risk of delivering more items to emergency areas if there is no extra compensation?  Why did people drive to Richmond after Hurricane Isabel with generators?

 By allowing prices to raise in emergencies you will ensure that there is no run on these items of necessity. In other words, if you already have a generator but would like another one you might be stopped by the higher costs.  However, if you don’t have a generator and need one, then there is a good chance there will be one there for you at the higher price!

We now have allowed government to force suppliers to set artificially low prices in emergencies and government has forbid consumers from buying the goods they need at pricing they are willing to pay!  Yep, that makes sense.  It just shows that no one would ever vote for me!

Richard and I will argue this tomorrow morning on 1140 WRVA from 6-8am during our storm team coverage of Tropical Storm Hanna.

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