An immediate response to a disaster by business is to raise prices on critical items. The market is best when it comes to dealing with scarcity, and there is nothing like a natural disaster to bring quick scarcity.
In anticipation of yet another hurricane in the Gulf Coast, one gas station has jacked up prices 15% to those fleeing the oncoming storm. Well done! By raising prices, suppliers will begin to charge more to the stations, and then divert more gas where it is presently short.
The risk here is completely on the gas station who very well may err in calculating what price is right, and end up with too much gas at too high a price, and then take a loss. And of course, the customers will return and exact any vengeance they may deem necessary.
The higher price also causes people to pause and say "Well, I need only 3 gallons to get the 60 miles inland to safety (where gas will be cheaper) so I'll just buy three gallons." Here again, the merchant is helping manage scarcity.
Since this is all good, the Government outlaws it.
If any business is found to have violated state or local price-gouging laws, they can face up to a $10,000 fine.
If after a disaster, you were floating down a river, exactly midstream and you saw FEMA on one side and the Salvation Army on the other side, to which side would you paddle?
Feel free to forward this by email to three of your friends.
In anticipation of yet another hurricane in the Gulf Coast, one gas station has jacked up prices 15% to those fleeing the oncoming storm. Well done! By raising prices, suppliers will begin to charge more to the stations, and then divert more gas where it is presently short.
The risk here is completely on the gas station who very well may err in calculating what price is right, and end up with too much gas at too high a price, and then take a loss. And of course, the customers will return and exact any vengeance they may deem necessary.
The higher price also causes people to pause and say "Well, I need only 3 gallons to get the 60 miles inland to safety (where gas will be cheaper) so I'll just buy three gallons." Here again, the merchant is helping manage scarcity.
Since this is all good, the Government outlaws it.
If any business is found to have violated state or local price-gouging laws, they can face up to a $10,000 fine.
If after a disaster, you were floating down a river, exactly midstream and you saw FEMA on one side and the Salvation Army on the other side, to which side would you paddle?
Feel free to forward this by email to three of your friends.
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