Category — ‘Price Gouging’ Law

[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.

Maryland’s Experience

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 →]