Comment

Bloomberg.com Cheers Post-Sandy Price-Gouging [Private Sector Disaster Relief]

2
lostlakehiker11/01/2012 4:30:16 pm PDT

I for one would welcome price gouging if I were trying to evacuate. I can see a number of scenarios.

(1) I have enough gas to get somewhere safe, but it’s not where I really want to go. The price gouger has put the price up, so I settle for the second-rate destination which is nearer.

(2) I’m running out of gas. I’m desperate. The price gouger has gas for sale, and I buy it. Not much. Just enough to get me to somewhere safe.

(3) I have enough gas to get somewhere safe, but it’s not where I really want to go. No price gouging is allowed, and the station has some left. I fill up and go on my way.

(4) I’m running out of gas. I’m desperate. No price gouging is allowed, and people like me but who got there first have already bought it out. I’m up the creek.

We are all, collectively, better off when prices signal scarcity. In a perfect world, price gouging would be allowed and indeed required, but taxes dedicated to disaster relief would scoop up 90% of the excess profits. Failing that, it’s better to permit the price gouging even though the money just fattens somebody’s coffers, than to forbid it and see fuel allocated frivolously on a first-come, first-serve basis.