Bring on the ‘price gougers’Page 2 of 2 -- Of course, price spikes are infuriating, especially to someone whose life has just been thrown into turmoil by a deadly storm.
But they do far more good than harm. Higher prices make it possible for victims to get the help they need to ride out the crisis and for the devastated region to recover as quickly as possible. They do so by sending the message that critical supplies and skills are urgently needed, and by inducing consumers with less-pressing needs to voluntarily defer to those whose needs are more exigent. When customers in Florida are willing to pay $10 for ice that usually goes for $2, or $400 to rent a generator that usually fetches $250, producers everywhere have a powerful incentive to ship truckloads of ice and generators to Florida. The higher price is justified not only by the higher demand, but by the higher costs associated with doing business in a disaster area. Newsday last week quoted the owner of a tree removal company, who had driven down from Miami and was charging twice his normal rate "because I've got to deal with more aggravation." "No one wants to come here when I can stay home and sleep in air conditioning next to my wife and kid, go to the gas station whenever I want and get gas," he said. "The ones who are willing to pay now know that they're not getting a great deal, but they're willing to pay a little bit more to get their lives together quicker." At the same time, price increases perform what George Mason University economist Donald Boudreaux calls "economic triage," directing supplies and repairs to those whose need for them is most pressing. Someone who wants a generator so he can power his computer and TV might be willing to rent one for $250. At $400, he is more likely to decide he can live without it -- thereby making it available to the butcher desperate for electricity so he can keep thousands of dollars' worth of meat from spoiling. When demand increases, prices go up. As prices rise, supplies do, too. And with higher supplies eventually come lower prices. It isn't "gouging," it's the way the world works -- even after hurricanes. Demonizing vendors won't speed Florida's recovery. Letting them go about their business will.
Jeff Jacoby's e-mail address is jacoby@globe.com. © Copyright 2004 Globe Newspaper Company.
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