Politicians–Not Hurricanes–Ensure Shortages
Politicians–Not Hurricanes–Ensure Shortages by Harrison Burge – The Daily Bell
In 2006, Kentucky resident John Shepperson tuned in from his home to watch Hurricane Katrina destroy the Gulf Coast.
Shepperson desperately wanted to help the recovery efforts… and to make some money in the process.
So, he and his family bought 19 generators, rented a U-Haul truck and drove 600 miles to an area of Mississippi without power.
There in Mississippi, he offered the generators for double the price he paid in Kentucky.
Shepperson found a welcoming market. Grateful residents afflicted by the storms lined up to buy his generators. Price be damned – these people valued the generators more than their money. Shepperson’s generators meant Gulf Coast residents would at least have some comfort amidst their misery.
But, the prospective buyers never received the generators they wanted and valued. And Shepperson’s goodwill was not rewarded with a profit.
Because the cavalry arrived to upset this voluntary market.
Police – taking orders, of course, from clueless politicians – confiscated Shepperson’s generators. And Shepperson was thrown in jail for four days.
His supposed crime? The politically-motivated, economically-illiterate, non-crime of “price gouging.”
According to the misinformed do-gooders (i.e. politicians, bureaucrats, local news stations and newspapers, etc.), price gouging occurs when suppliers charge above market rates for goods and services.
But in the aftermath of a natural disaster, the demand for goods and services rises. So naturally, a limited supply and increasing demand should translate into abnormally higher prices.
These higher prices are not above market rates. They are the new market rates.
And if left solely to the free market, these higher prices will only be the new, temporarymarket price.
Prices continuously send signals to the market to seamlessly guide buyers and sellers. There’s no more crucial of a time for this price signal than immediately following a natural disaster.