John Stossel: Price gouging is just supply & demand |
Featured Commentary

John Stossel: Price gouging is just supply & demand

Nick Monroe waits at a gas station in hopes a truck will bring fuel for his vehicles and generator near Wilmington, N.C., Monday, Sept. 17, 2018. Desperate for gas to run a generator at home, Monroe waited in a half-mile-long line at a Speedway station even though the pumps were wrapped in plastic. His power went on Thursday before Florence hit the coast, but he couldn’t recall exactly when.

Officials in states hit by Hurricane Florence are on the lookout for “price gouging.”

People who engage in “excessive pricing” face up to 30 days in jail, said North Carolina’s attorney general. South Carolina passed a “Price Gouging During Emergency” law that imposes a $1,000 fine per violation.

“Gouging” is an issue during every disaster because when supplies are short, some merchants raise prices. These are “bad people,” said Florida Attorney General Pam Bondi angrily during a previous storm.

“Gougers deserve a medal,” Nobel Prize-winning economist Milton Friedman once told me. That’s because higher prices are the best indicator of which goods people want most.

This is a hard concept for people to understand.

“They’re not heroes. They’re scabs who prey off the desperate,” wrote James Kirkpatrick in the comments after watching my latest video about this. “Only Stossel would praise greed,” added Paul Nadrotowski.

I don’t praise greed. Pursuing profit is simply the best mechanism for bringing people supplies we need. Without rising prices indicating which materials are most sought-after, suppliers don’t know whether to rush in food, or bandages, or chainsaws.

After Hurricane Katrina, one so-called gouger was John Shepperson of Kentucky. He learned that people desperately needed generators, so he bought 19 of them, rented a U-Haul, and drove it 600 miles to a part of Mississippi that had no electricity. He offered to sell them for twice what he paid for them. People were eager to buy.

But Mississippi police said that was illegal. They confiscated Shepperson’s generators and locked him up. Did the public benefit? No. The generators sat in police storage (I suspect some cops took them home to use while Shepperson sat in jail) .

Who will bring supplies to a disaster area if it’s illegal to make extra profit? It’s risky to invest in 19 generators, leave home, rent a U-Haul and drive 600 miles.

“Being moral is loading up supplies and donating them to people in need,” someone wrote on my YouTube page.

Yes, but in real life, not enough people do that to satisfy the needs of thousands of desperate people.

Prices are not just money. They are information . They are what signal entrepreneurs to go into a given business. Rising prices are the clearest indicator of what most customers want. Without extra profit, suppliers tend to stay home. That’s easier and safer.

If prices don’t shoot up during disasters, consumers hoard. We rush to gas stations to top off our tanks. Stores run out of batteries because early customers stock up. Late arrivals may get nothing. America should have learned that when Richard Nixon imposed price controls on gasoline. That gave us gasoline shortages and long gas lines. But politicians don’t learn.

Fortunately, kids who learn about free markets via the Stossel in the Classroom charity know better. We ran a contest inviting students to write an essay or make a video about price gouging.

“In modern day, you see countries like Venezuela suffer from the fact that their governments place price controls on all items,” said 17-year-old Annelise Kofod of Raleigh, N.C. She won the high school video award.

After researching prices and disasters, Maggie Hroncich of Grove City, Pa., winner of the high school essay contest, said, “actually, the price gougers are the moral ones.”

I won’t make claims about their morality. But I do know that allowing prices to rise, even sharply, is the best way to help desperate people get supplies they need.

As supplies rush in, prices quickly return to normal. We shouldn’t call it gouging. It’s just supply and demand.

The best thing “price police” can do in a disaster is stay out of the way.

John Stossel is author of “No They Can’t! Why Government Fails — But
Individuals Succeed.”

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.