Letter: ‘Gouging’ not necessarily bad

Maybe we can learn something from Sandy’s aftermath that escapes us when dealing with our own storms. The gas shortages and long gas lines are the result of anti-gouging laws. These laws are short-sighted and counterproductive. They increase the severity of the storm aftermath and extend its length.

If the price of gas was allowed to seek the market level, consumers would conserve more and producers would deliver more; lines would shorten and normality would return quickly. A guy sitting in Alabama with a semi trailer full of gas might decide to drive that truck up to New Jersey if gas were selling for $9 a gallon. But if the price in New Jersey is the same as in Birmingham, why make the effort?

Before our next storm, we need to abolish gouging laws in Louisiana. Instead of going on the radio with ominous warnings to “price gougers,” the attorney general would remind the world that there are no such laws in Louisiana. The governor would announce that a storm is coming, that prices will be going up on various things in Louisiana, and we invite the rest of the country to come gouge us. In fact, the more gougers that show up, the less they will be able to gouge and the faster prices (and life) will return to normal.

The radio coverage would encourage people to call in and report how much they paid for the things they need and thus help communicate to those coming to gouge us which things are in most critical demand.

So instead of handcuffing the invisible hand to some self-aggrandizing bureaucrat’s desk just when we need it most, we should give it maximum freedom and watch in amazement at how quickly things recover.

John Foster

engineer

Baton Rouge

Comments

1) Comment by InPVille - 13/11/2012

@Bighug: About the water, it would all depend on the context. In dire circumstances such as in the movie "Abandon Ship" you might have to decide the possibilities, given available resources, for the greatest number surviving and perform a kind of triage. If I lived in a desert and someone happened upon my residence in the circumstance you cite, no charge.

2) Comment by Bighug - 13/11/2012

Thanks for the refresher course in business, InPVille. Looks like they haven't repealed that law since it was proposed in the 19th century, or since I received my degree in Business Administration. We all understand the basics, and in case you hadn't given it any thought, the mechanics of supply and demand are exactly the reason that anti-gouging laws are needed. The price for the commodities needed during an emergency have already been set in the market, and supply at that price will prevail as soon as products are able to be moved into the area. I hate to imagine what you would charge a lost person in a desert for a drink of water.

3) Comment by DMJ - 13/11/2012

I both agree and disagree with Mr. Foster.. One, I think gas prices should be substantially higher - this would decrease traffic, reduce carbon emissions, fund public transit, greenways, bike lanes and sidewalks and encourage people (albeit through disincentives) to use alternate modes of transportation. This would have a fundamentally positive effect on American society. That being said...I think it's immoral for oil companies to take advantage of a natural disaster in order to make more money. Obviously, only those who can afford to pay exhorbitant prices (all of a sudden) would be able to get gas. Eliminating gouging laws is one of the most regressive things you can do. It's immoral.

4) Comment by bourbon-soda - 13/11/2012

Price ceilings produce shortages. Price floors or subsidies produce surpluses.

5) Comment by Being_Stupid - 13/11/2012

Agree. Better to have high price gas, than no gas at all. Unfortunately government lawmakers have no concept of economics and how the real world works. "Feel-Good" legislation does no good at all.

6) Comment by Being_Stupid - 13/11/2012

Government would be more efficient if we had more engineers in office instead of lawyers.

7) Comment by swinham - 13/11/2012

An even more obvious result of eliiminating these laws would be a reduction in demand. When these things happen people panic and buy more gasoline than they need. They would be less likely to do so if the price was double or triple the normal price. As demand went down, so would the prices. In other words, this would be the perfect situation for the free market.

8) Comment by Bouncer - 13/11/2012

Why not just gouge everyone, all the time, and have done with it? Good grief.

9) Comment by chem - 13/11/2012

After a storm, there is no real shortage of goods. Gas is plentiful, as is food and other necessities. The "shortage" is simply an interruption of the delivery of such items because of road closures, flooding, electricty out, etc. People are already in a very bad way because of the storm, they should not be further screwed by pariahs such as John Foster.

10) Comment by cbelse1 - 13/11/2012

Mr. Foster's idea seems based on textbook theory and not logic or reality. He claims that "producers would deliver more" in the wake of a storm to meet the high demand. Let's think about this: When a storm approaches the Louisiana coast, what is the first industry to begin shutting down? Offshore oil rigs. For the rest of us on land, stressors such as power outages, impassable roads, flooding, curfews, etc., contribute to the mass hysteria of needing gas, batteries, water, etc. and also prevent "producers" from delivering said items. Maybe Mr. Foster would be in favor of eliminating post-disaster relief because groups and agencies giving away supplies hurts capitalist business owners trying to make a buck. "God bless 'Merica."

11) Comment by InPVille - 13/11/2012

@Bighug & gary: Mr. Foster is citing an extreme example of the "Laws of Supply and Demand". Perhaps you both should advocate for their repeal. -[**]- http://en.wikipedia.org/wiki/Supply_and_demand "Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium of price and quantity. The four basic laws of supply and demand are: 1.) If demand increases and supply remains unchanged, a shortage altogether, thus leads to a higher equilibrium price. 2.) If demand decreases and supply remains unchanged, a surplus altogether, thus leads to a lower equilibrium price. 3.) If demand remains unchanged and supply increases, a surplus altogether, thus leads to a lower equilibrium price. 4.) If demand remains unchanged and supply decreases, a shortage altogether, thus leads to a higher equilibrium price." -[**]- The concept is that If the price is allowed to rise, it provides an incentive to increase supply. This in turn leads to lower prices. Supply would tend to increase more quickly. Price fixing results in shortages. People are still left out in the cold as provided in the excellent example cited by gary and if there is no supply for people to use as provided in Bighug's example, people will be left with no fuel to get them to their employment until the supply increases. Reality is not what it is convenient for us to experience. It is. . . what it is, cruel though it may seem.

12) Comment by Bighug - 13/11/2012

Good idea. As soon as someone loses his home, job, and car, stick it to him by charging him an exorbitant price for a bottle of propane to heat his tent!

13) Comment by gary - 13/11/2012

What an excellent idea, someone who needs gas to run their heaters to keep from freezing - that is just one example - I could cite a dozen more, that is the American way - make a profit on the backs of someone that is trying to stay alive. I believe in supply and demand for certain goods - but not to rob from people.