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September 16, 2008
Price Gouging: Because
of the Hurricanes, We Need It
This column examines
current examples of anti-“gouging” impulses in areas affected by recent
hurricanes. For an in-depth explanation of the benefits of
“price-gouging,” please see
The following is part of a press release issued yesterday by the Florida
Department of Agriculture and Consumer Services:
H. Bronson today announced that his office received nearly 2,200
price-gouging calls over the weekend and 816 complaints – virtually all
involving the price of gasoline. All of the complaints are being
investigated, and subpoenas will be issued later today for oil company
records . . .
“We are committed to
making sure that Florida residents and visitors to our state are being
treated fairly,” Bronson said.
Under state law,
persons or companies engaged in price gouging – defined in the law as
charging excessive prices for basic commodities such as fuel, shelter,
water, ice and lumber during a state of emergency – face fines of up to
$1,000 per violation up to a maximum penalty of $25,000 a day.
Bronson is encouraging
any citizen to report price-gouging activity that they encounter to his
toll-free hotline at
1 800 HELP FLA
This is in addition to the following news from Florida:
On Sunday, Florida
Attorney General Bill McCollum announced the activation of the Attorney
General’s Price Gouging Hotline for Floridians to report anyone
attempting to take advantage of people preparing for or evacuating from
the hurricane, at 1-866-9-NO-SCAM.
“Complaints?” “Subpoenas?” “Fairly?” “Excessive?” “Fines?” “Scam?”
What is going on here?
Let’s get this straight. Due to reductions in production and
interruptions in supply lines brought about by hurricane activity, gas
station owners have ended up with limited gas to sell. At the same time,
due to widespread fear of shortages, consumers look to purchase much
more gas than usual. So, there is significantly increased demand and
significantly decreased supply. And you call raising prices a “scam?”
Not only should gas station owners be allowed to raise prices in such a
situation, but they absolutely must raise prices. If they don’t,
shortages will happen and the gas will run out. More worryingly, people
who really, truly need the gas will find themselves helpless as they
lose out to those who were merely lucky to get to the pump first.
Gas station owners already know this economic fact. That is why, for
fear of being called “price gougers,” they have found that the only
alternative to merely rewarding the fast and the lucky is to attempt to
spread out distribution as much as possible. As a news article tells us:
Some Central Florida
retailers are limiting fuel sales, and one convenience store chain with
a store in Bonita Springs is asking customers to limit gasoline
purchases to 10 gallons.
other words, they are forced to give equal treatment to teenagers, who
are buying artificially cheap gas while gallivanting around town, and to
those who run a business dependent on gas or who need to drive to help
sick grandma. And because the teenagers now have nothing deterring them
from buying gas, they will wastefully empty the stockpiles as long as
the price is low. Due to all the “price gouging” hotlines, gas stations
cannot raise prices in order to allow the latter group – those who truly
need the gas – to get the gas on which their lives and health depend.
The hotlines are preventing gas stations from taking the only course
that would ensure a continuing, non-ending supply of gas to those who
need it for an emergency or an otherwise crucial trip across town.
Why should this vital public service be something to “complain” about?
How is it “unfair” to anyone but the lucky few who otherwise would have
been rewarded merely for their coincidental proximity to a gas station
at the right time? How exactly does the Florida Department of
Agriculture and Consumer Services know that any price is the
“right” price, as opposed to an “excessive” price? Where is the talk of
“subpoenas” and “fines” appropriate in a situation where gas station
owners are doing their best to ensure continuing supply to those who
Commissioner Bronson also says that retailers should not raise prices
arbitrarily merely because they anticipate higher prices in the future,
which of course is incongruous because if they are anticipating higher
prices in the future, a current price raise would not be “arbitrary” –
it would be a response to economic factors.
Instead, the commissioner is going to force gas stations to reduce their
prices arbitrarily regardless of economic factors and the realities of
supply and demand, leading to severe shortages. That makes so much more
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