Disaster Ignorance

Townhall.com ^ | November 14, 2012 | Walter E. Williams

[Kaslin]

Here's a which-is-better question for you. Suppose a New Jersey motel room rented for $125 a night prior to Hurricane Sandy's devastation. When the hurricane hits, a husband, wife and their two youngsters might seek the comfort of renting two adjoining rooms. However, when they arrive at the motel, they find that rooms now rent for $250. At that price, they might decide to make do with one room. In my book, that would be wonderful. That decision would make a room available for another family who had to evacuate Sandy's wrath. New Jersey Gov. Chris Christie and others condemn this as price gouging, but I ask you: Which is preferable for a family seeking shelter -- a room available at $250 or a room unavailable at the pre-hurricane price of $125? It's not the intention of the motel owner to make a room available for another family. He just sees an opportunity to earn more money. It was not the intention of the family of four who made do with just one room to make a room available for another evacuating family. They are just trying to save money. Even though it was no one's intention to make that room available, the room was made available as if intended. That's the unappreciated benefit of freely fluctuating prices. They get people to do voluntarily what's in the social interest -- conserve on goods and services that have become scarce.

Gov. Christie told merchants that price gouging during a state of emergency is illegal because "during emergencies, New Jerseyans should look out for each other -- not seek to take advantage of each other." Christie warned: "The state Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties." It's not just Christie who has threatened to prosecute sellers for raising prices. New York Attorney General Eric Schneiderman has launched an investigation into post-storm price increases after receiving consumer complaints about higher prices for everything from gasoline to hotel rooms.

Christie, Schneiderman and public officials elsewhere know better or have access to economists who inform them. But they're playing politics with people's suffering, emotionalism and economic ignorance. By the way, politicians would serve us better by focusing their energies on tax gouging.

Disasters produce ignorance in another way. Peter Morici is a professor at the University of Maryland and a former chief economist at the U.S. International Trade Commission. He argues that Hurricane Sandy may prove to be an economic boon, writing: "Disasters can give the ailing construction sector a boost, and unleash smart reinvestment that actually improves stricken areas and the lives of those that survive intact. Ultimately, Americans, as they always seem to do, will emerge stronger in the wake of disaster and rebuild better -- making a brighter future in the face of tragedy."

Professor Morici is not alone in this vision. Nathan Gardels, editor of New Perspectives Quarterly, wrote an article titled "The Silver Lining of Japan's Quake," arguing the economic "benefits" of that disaster. Even Nobel laureates are not immune from this vision. After the 2001 terrorist attack, economist Paul Krugman wrote in his New York Times column titled "Reckonings; After the Horror" that as "ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good." He explained that rebuilding the destruction would stimulate the economy through business investment and job creation.

We conservatives may never reach a consensus among ourselves as to the main factors that caused our election defeat, but surely we can agree that we must do a better job of selling our ideas. The billions of dollars that will be earned by people in the building industry and their suppliers will surely create jobs and income for those people. But rebuilding diverts resources from other possible uses. Natural or man-made disasters always destroy wealth. Were that not the case, mankind could achieve unimaginable wealth through wars, arson, riots and other calamities.

[Tax-chick]

This is just another illustration of “Price controls create shortages.” I was surprised when I learned that people from Canada did not remember gas lines and rationing during the Arab Oil Embargo ... because they didn’t have price controls. Duh!

[mazda77]

I suppose Mr. Williams has been listening to Boortz. Neal has been pontificating on this very point for as many years as I have known about or listened to him.

[sodpoodle]

I’m still amazed at how most residents watched the storm from their ocean-side homes - as if it were a TV show. They had no clue about turning of their breaker boxes - nor how much labor would be required to get utility trucks, power poles and workers to restore each and every devastated house to a functioning state.

We are so accustomed to all the modern conveniences that support our ‘laid back’ lifestyle - we are incapable of dealing with crises - even when they are forewarned.

[T-Bird45]

Since Dr. Williams has been an esteemed free-market economist of long-standing, I think it’s more likely they are just on parallel paths. Actually, anybody who has taken six hours of college-level economics should have been exposed to the basic concepts on the interaction of price, supply, and demand. The NJ governor is guilty of political pandering with a stench from associating himself with the Community Organizer-in-Chief.

[mazda77]

I don't disagree on the parallel path mention but as far as espousing it publicly everytime a natural disaster comes along for over 15 years that I know of, Boortz has articulated this very scenario on the air everyday it is an issue. Thank goodness others are now making the argument on this personal level and not reliance on the elitist attitude that everyone should get this concept through deductive reasoning. They have long forgotten that deductive reasoning and critical thinking are no longer being taught in our government schools.

[MrB]

Where’s the FReeper that was saying that prices shouldn’t be allowed to increase,

the business should just limit how much you can buy.

Even amongst us, there are economically ignorant folks.

Read Sowell’s “Basic Economics” and you’ll then know how the world works.

[Tax-chick]

I remember that guy, but don’t recall who it was. Many people seem to think that prices are an expression of personal virtue, rather than a measure of the intersection of desire and supply.

[melsec]

Making this sort of price gouging illegal is stupid and probably wouldn’t stop it anyway. One can always remind a price gouger that you will still be around after all is fixed to remind people of what scum they are and that you intend to do that when ever you have free time!

You have to make their short term gain seem less attractive than having a long term business. Of course you have to mean what you say and so many people have no follow through.

Legitimate bargaining in a free economy!?

Mel

[fella]

But it’s OK for the local governments to raise property taxes on those people who have had their homes damaged to pay for the cost of public repairs that going to be covered by federal assistabce anyway?

[KrisKrinkle]

We need to understand that in either case the guy who only has $125 is SOL. Does he ever get addressed in these discussions?

[Terry Mross]

So, Christie only believes in communism during emergencies. The problem is WHO decides what is and what is not an emergency?

[Ferris]

The average American has absolutely no clue of the basic laws of economics

None whatsoever.

And that's precisely why the situation is like that..