There they went. Again.
As Hurricane Matthew bore down on America’s Eastern Seaboard last week, some in the mainstream media trotted out the tried but hardly true story about “price gouging.”
In typical and close-to-breathless fashion, reporter Jeff Rossen sounded the “gouging” alarm on NBC and MSNBC. He called price spikes for everything from motel and hotel rooms, to bottled water, to the price of gasoline “about as low as it gets.”
Businesses “were taking advantage of … evacuees at their most desperate time,” he said, noting that social media were exploding with tales of gasoline prices increased to $9.99 a gallon.
“Nine dollars and ninety-nine-cents for gas, just because they know people are going to need to use the roads, and they need to get out and evacuate, and also because gas is in short supply here,” he continued.
Zounds, Mr. Rossen — prices go up when supplies are short?!
Rossen also complained of “$18 water, a lot more than it should cost” and hotels that raised their prices from $50 a night to $200.
“Unscrupulous” became the pejorative du jour.
Even Pam Bondi, Florida’s attorney general (a Republican, no less) was all over the airwaves urging residents to report “price gouging.” She activated the state’s “price gouging hotline” — (866) 9-NO-SCAM. “Scammers” might use Matthew “to prey on consumers,” she warned.
Florida law prohibits “extreme increases” in the price of essential commodities, such as food, ice, gas, hotels, lumber and water during states of emergency, Bondi reminded.
It is “unlawful” for businesses to raise prices by an amount “that grossly exceeds the average price for that commodity during the 30 days before the declaration of a state of emergency.”
“Grossly exceeds” to be determined by the government, of course. It’s the same “government” that always seems to have such a proclivity to attempt to command the marketplace.
But as economics scholar Mark Thoma reminded a few years back, one person’s “price gouging” is a far more astute person’s textbook case of, yes, supply and demand but, also, the magic of the markets.
Economists “believe that price increases are the best way to allocate scarce goods and services after a natural disaster and, importantly, to encourage additional supply,” wrote Thoma, a University of Oregon economics scholar, in the aftermath of the same “gouging” debate following Hurricane Sandy.
Simply put, shortages result when prices don’t go up to meet demand. Thus, the choice becomes commodities at a higher price or no commodities at all.
Or as Sandy Ikeda, a professor of economics at Purchase College, State University of New York, put it last March, referring specifically to gasoline:
“As long as buyers and sellers … are free to adjust prices (i.e. in the absence of price controls), then the quantity demanded and supplied will tend to be equal. Markets will clear, which means no surpluses (unexpected inventory accumulation) and not shortages (no people willing to pay will be turned away).
The only thing that will cause a shortage? Price ceilings, he reminds.
“Bluntly, the solution to high prices is, well, high prices. The higher the price gets, the greater incentive for sellers to provide more of the product that is in short supply.”
Mark Perry, a University of Michigan economist and a scholar at the American Enterprise Institute, concurred at the time:
“Rising, market-based prices following a disaster are the most effective method possible for allocating scarce resources, eliminating shortages and attracting essential supplies to the areas that need them most before a disaster — wind and rain don’t change the reality.”
Continued Perry, “It’s only in the fantasy world of politics that the ‘anointed elected officials’ think they can get to be the ‘price deciders’ and determine if sellers are guilty of ‘price gouging.’
“In the real world of the marketplace it’s much different and much more democratic — the impersonal market forces of supply and demand become the ‘price deciders’ and we’re all much better off with those market-determined prices than with artificial prices determined by politicians and bureaucrats,” he logically concluded.
But economics logic is the first thing the evades uniformed reporters, a poorly educated public and, of course, pols looking to score points with both.
To paraphrase Euripides, the Greek tragic dramatist: Puff up the people with specious words or phrases — “price gouging” — sway them to their media-indoctrinated bias — eviscerating “greedy capitalists” — and then, when calamity follows — product shortages — escape from justice.
Colin McNickle is the former director of editorial pages for the Pittsburgh Tribune-Review.