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WSJ Editorial: Price Gouging Is Good After Natural Disasters

An editorial in the Wall Street Journal praised the use of price gouging after natural disasters.

An editorial in the Wall Street Journal praised the use of price gouging after natural disasters.

High prices are an essential way to ensure that resources get where they are desperately needed. Imposing artificially low prices creates shortages of vital supplies and makes it harder for people to recover from disasters. Consider gasoline. In Orlando, Fla., a gallon of regular was selling for as much as $5.99 in the days before Hurricane Irma made landfall, and a 24-pack of bottled water was spotted selling for $99.99 from a third-party vendor on Amazon.

The author is more attached to economic principles than to human suffering.

The impulse to denounce the greed reflected in such prices is human. But price hikes are a response to scarcity, and signals that reveal the true severity of scarcity are critical during storms and other crises. Price hikes let consumers know that fuel is scarcer than it was. Price hikes prompt consumers to use fuel more judiciously, buying less gasoline than they would at a lower price. They take fewer unnecessary trips, diminishing pressure on supplies. Price hikes also create a financial incentive for suppliers from outside the area to move their product into high-demand zones. As supplies return to normal, so do prices.

His argument presumes the price equilibrium reached during natural disasters is based on actual supply and demand, not just predatory sales behavior.

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