Category — Price Controls
[Ed. note: This post follows yesterday's post by Donald Hertzmark challenging a call for federal price controls on energy.]
The spectacular problems that beset the Federal Emergency Management Agency (FEMA) after Hurricane Katrina have led analysts of weather emergencies to look elsewhere for leadership, or even evidence of competence.
Increasingly, that leadership has been found prominently in the private sector: among companies being recognized for their emergency response capabilities are big box retailers like Walmart and Home Depot and the regional restaurant chain Waffle House.
One reason that some government agencies may be failing is that their attention is directed to the wrong things. High on that list is policing against high prices during emergencies. Basic economic analysis finds that price gouging laws end up wasting state government resources and wasting consumers’ time during emergencies.
New Jersey re Hurricane Irene
If you review official announcements in the days surrounding Hurricane Irene, you’ll notice that in some states much emphasis was placed on warning merchants against price gouging and encouraging consumers to report “suspicious price increases.”
Just before Hurricane Irene came ashore, the State of New Jersey thought it importantto urge “consumers to be alert for potential abuses including gasoline price gouging, home repair scams, and fraudulent charity solicitations.”
Subsequently the state reported receipt of 103 consumer price gouging complaints, which the state duly investigated. The investigation ended up finding no stations guilty of price gouging, though three stations allegedly violated the state’s law against changing gasoline prices more than once in a 24-hour period. The three stations have been cited by the state.
Several persons died in New Jersey due to flooding, and the damages may reach “billions of dollars” according to Governor Chris Christie. These are real emergency issues. In response, among many other actions, the state had investigators out counting how many times gasoline stations may have changed prices within each 24-hour period since the emergency was declared.
But, you protest, without the anti-price gouging law and attempts to enforce it, New Jersey residents would have been held hostage by greedy gasoline retailers anxious to exploit consumers in peril.
Really? Neighboring Maryland doesn’t have a law against price gouging. Anyone notice Maryland consumers being exploited by greedy gasoline retailers? [Read more →]
October 4, 2011 3 Comments
Call for Energy Price Controls: Has the 1970s Experience Been Forgotten? (hidden perils of a $3.50/gallon federal price cap)
[Editor note: Tomorrow, economist Michael Giberson will critically assess government 'price gouging' laws.]
As an economist, whenever I hear the word “shortage” I wait for the other shoe to drop. That other shoe is usually “price control.”
- Thomas Sowell, “Electricity Shocks California,” January 11, 2001.
Like Bill Murray’s weatherman character in the movie Groundhog Day, the American public is obliged to relive certain bad ideas again and again (and again).
Like the movie the idea of price controls for energy keeps coming back, but will we, like Murray’s weatherman, reexamine what leads us to relive such unworkable concepts? The latest contestant in this march of folly was posted recently in the Atlantic Monthly’s business blog.
The idea–called a buffer fund–is to establish a target price for retail gasoline (diesel, too, though they seem to have forgotten that part of the fuel supply) and use taxes or subsidies to maintain the target price over time.
Price Controls – Back by Popular Demand
The response from the readership was immediate, never mind how any of this would work, whether it has everworked as planned elsewhere, or what would happen to the economy if it were implemented. This is a great idea! Stick it to Big Oil! Let somebody else pay for my gasoline!
A sample of some of the comments on the Atlantic article includes the following gems:
· Normal market operations concentrate too much money in the oil industry
· Oil companies never put their earnings back into the economy
· We consume too much oil and only rationing can cure the disease (at least this one acknowledges that price controls accomplish nothing)
· It all stems from allowing (!) people to live in single family houses
· Speculators are behind all the problems!
This time the justification for a buffer fund and price controls is that every time the economy gets rolling, energy prices rise and snuff out the recovery in the crib.
Really, I am not making this up. [Read more →]
October 3, 2011 2 Comments