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"The man out to end us had a hurricane business"

Thus sang Tom Petty, in "A mind, with a heart of its own." The theme is old, but the controversy never ends.

Ben Muse offers helpful commentary and rounds up interesting posts from the past two seasons on the "price gouging" that accompanies major hurricanes. He includes a link to today's anecdote-filled story in the New York Times, which essentially could have been written after Hugo (1989), Andrew (1992), or any significant storm from the past 25 years. Pathetic for the Times, really.

Listening to NPR's "Marketplace" on today's ride home, I heard the Times' account repeated, along with an interesting interview with a law professor from Cornell. The professor suggested there was a tradeoff between the short term welfare loss due to legal bans on "gouging", and a long term benefit from such bans. Where is the benefit? Supposedly, a ban on gouging keeps prices from jumping, and thereby helps maintain the public's faith in day-to-day markets. I follow, but this seems like a slim reed to me. Do these bans have any real effects that would act as a restorative to faith? The behavior at issue is not that of Home Depot or McDonald's - who don't hike prices - but that of small time operators. People who truck in chainsaws and ice, guys who operate - in a mutually beneficial form - "a hurricane business."

Update: Absent from Ben's list is Brendan Koerner's piece on gouging laws at Slate. Koerner notes the following episode, which I recall:

In some states, a governor can also institute temporary price-gouging controls with an executive order, even if a state hasn't been directly hit with a calamity. The day after the terrorist attacks of 2001, for example, South Carolina Gov. Jim Hodges signed a 15-day executive order to prevent price gouging on gas, despite the fact that his state was hundreds of miles from the violence.

Hodges' use of this law (which surely traces to the hurricane problem) illustrates the politcal nature, as opposed to the economic value, of gouging legislation.

Footnote: Fraud has something to do with this issue, but that is separate from the issue of concern to me. Those that falsely prey on people should be prosecuted. But much of the so-called gouging - indeed the behavior targeted by these laws - has nothing to do with fraud.