Preemptively slaying the ‘gouging’ shibboleth
Autumn crept in early Monday. And with it, so, too, the usual prognostications of what the coming winter will deliver.
The folklorists – in their 2019-20 almanacs – appear to be predicting a particularly snowy and/or icy winter in the region. Meteorologists thus far have hedged, offering no solid predictions. But at least one local forecaster quipped that, “Yes, winter will happen.”
All that said, should there be any major winter storms – the kinds of snow/ice/wind events this coming season approaching one of those proverbial “Snowmageddons” of Pittsburgh’s past — surely it will bring with it complaints of “price-gouging” on products necessary to beat back Ol’ Man Winter’s onslaught.
And just as surely the loud calls for local, state and/or federal governments to cap prices with “anti-gouging” laws will follow. Never mind that such laws are among the worst public policy pronouncements there are. Why? Because they end up having the exact opposite effect of what their oftentimes intellectually bereft and typically pandering advocates intend.
Thus, it’s a good time to repeat a shibboleth-slaying tutorial from an old friend, Donald J. Boudreaux, a professor of economics at George Mason University:
He reminds that during natural-disaster situations, “for certain goods, demand is unusually high and supplies are unusually low.”
“Evidence that the market is indeed still functioning properly is precisely the fact that it accurately reports these unusual conditions of demand and supply in the form of unusually high prices.
“These high prices, in turn, prompt ‘proper’ market responses: you and others in the disaster area are led to consume goods and services with greater prudence and — more importantly — suppliers are given intense incentives to work unusually hard to bring” needed supplies to affected areas, Boudreaux notes.
“High prices, as painful as they are, are not as painful as the alternative, which is doing without the goods altogether. …
“The bottom line is this: so-called ‘gougingly’ high prices are evidence not of a market functioning poorly but of a market functioning well,” says Professor Boudreaux.
“Further, only by allowing the market to function in this way will more-abundant supplies, lower prices and other ‘normal’ conditions be restored as quickly as possible.”
Concludes Boudreaux: “As beneficial to humanity as an unimpeded price system is in normal times, it is far more beneficial in desperate times such as those caused by natural disasters.”
Keep this in mind should the winter ahead turn extreme from time to time and perhaps the prices of water, ice-melt, sand, shovels, snow-blowers, portable heaters and whatever else rise to reflect that storm-increased demand.
This fundamental market reaction very well could be the difference between having such supplies and having none at all. “Anti-gouging” laws interfere with the former to virtually guarantee the latter.
And, again, that’s the antithesis of sound public policy.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (email@example.com).