Anti Price Gouging In Hurricane Katrina

Hurricane Katrina. The Northridge Earthquake. Hurricane Sandy. These three catastrophes were the costliest natural disasters in U.S. history.1 Damages accounted for billions of dollars, countless types of critical infrastructure were lost, and thousands of lives were lost. These three hurricanes are examples of natural disasters harming millions of people; however, the United States government itself plays instrumental parts in harming even more American citizens in many natural disasters.

34 states have laws against price gouging.2 Although many of these states believe they may be doing the best for American citizens, they certainly are not.

Price gouging, for lack of a better, less negative term, is the practice of raising costs of goods

Imagine a natural disaster has recently hit the city where you live. You clearly need supplies, so you head to the nearest convenience store. You wait in line and watch as a lady walks out of the store struggling to drag six cases of water bottles behind her. When you reach the front of the line, to your horror, all the water bottles are gone, and the early customers have taken everything, leaving you and other customers currently in line without a single drop of water. That situation was under anti-price gouging laws and these laws created huge shortages in necessities. However, consider the situation again, but without these anti-price gouging laws. The lady at the front of the line, faced with higher costs for the cases of water, may instead buy only two cases. So finally when you reach the front of the line, you can actually get access to water. When stores are not limited by the price gouging laws, more consumers can buy what they need. It ensures many more of these disaster victims can access these critical

Tyler Cowen, economics professor at George Mason University notes that “attentive customers may buy up the whole stock, resell it during the emergency and price gouge themselves or store employees may funnel the scarce goods to their friends and relatives.”4 In the first situation, price gouging still happens, just under the radar of the acting government. Additionally in the second scenario, store employees can prioritize their family and friends and essentially decide who actually acquires crucial supplies. This black market is harmful to both businesses and consumers alike. By legalizing price gouging, we prevent price gouging that harms businesses, make sure these store employees can’t just funnell all the supplies to their close friends and relatives, and benefit more