“In 1996, Hurricane Eran struck North Carolina, leaving over a million people in the Raleigh-Durham area without power. Without any way of refrigerating food, infant formula, or insulin, and without any idea of when power would be restored, people were desperate for ice, but existing supplies quickly sold out. Four young men from Goldsboro, which was not significantly affected by the storm, rented refrigerated trucks, bought 500 bags of ice for $1.70 per bag, and drove to Raleigh. The price they charged for the ice was $12 per bag—more than seven times what they paid for it.
…The four men …were probably not moved to drive to Raleigh by altruistic motives. But in doing so, they did something to help ALLEVIATE THE SHORTAGE of ice that Raleigh was facing.” Unfortunately, these men were arrested for price gouging and the ice was left to melt. This means, rather than paying $12 per bag for ice, helpless citizens who desperately needed refrigeration to accommodate the needs of the sick, young, or elderly, instead paid $0 for NO ice. Let’s be clear about this, the prolonged shortage of ice was the result of anti-gouging laws, not greed. Imagine your own helpless relative and ask, does NO ICE sound better than EXPENSIVE ice?
Another well-known gouging case involves the actions of John Shepperson. “After the Hurricane Katrina disaster, John bought 19 generators, rented a U-Haul truck, and drove 600 miles from Kentucky to Mississippi. In return for his efforts and risk, he hoped to sell the generators at double his purchase price. Instead, he was arrested for price gouging, spent 4 days in jail, and the generators were confiscated. It’s a tricky issue: while Mr. Shepperson’s morality can be debated, his initiative would have unequivocally added supply and made some people better off. We all are charitable, of course, but how many of you would have rented a truck and driven twelve hundred miles round trip to sell generators for the price you purchased them?” [e]
This is something even the leftist publication Slate understands. Speaking out against the dangers of anti-gouging laws, Matthew Yglesias attempts to guide Slate’s largely left-leaning audience with the following explanation:
“These laws are hideously misguided. Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.” [f]
“The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time: They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.” [f]
"More price gouging would greatly improve inventory management. There is a large class of goods—flashlights, snow shovels, sand bags—for which demand is highly irregular. Maintaining large inventories of these items is, on most days, a costly misuse of storage space. If retailers can earn windfall profits when demand for them spikes, that creates a situation in which it makes financial sense to keep them on hand. Trying to curtail price gouging does the reverse." [f]
"Declining to raise prices in the face of spiking demand and inelastic supply is a very odd form of charity: It doesn’t create any new resources, just allocates them arbitrarily to whoever shows up first." [f]
When disasters hit, they literally destroy or damage regional suppliers. That means suppliers from OTHER regions have to ship further than normal in order to meet the demands of the impacted region. That obviously comes with additional facilitation costs. To not understand this is to deny basic math. Greater distance plus greater time does not magically equal “nothing.” Prices NEED to adjust to compensate adequately.
For instance, hurricane Katrina "shut down 95% of the crude oil production in the Gulf Coast, 13% of the refining capacity in the United States, and major pipelines, particularly those bringing supplies from the Gulf Coast to the mid-Atlantic seaboard. When Rita hit the next month, the combined impact of the two storms was to knock out 25% of U.S. refining capacity. Given the reduction in the amount of gasoline available for consumption, additional supplies needed to be DIVERTED to affected regions, actual consumption HAD TO DROP, or BOTH."