Earthshaking Economics, Part 2

Dave Killion — March 14, 2011

When a natural disaster occurs there is always a concern over ‘price-gouging’. One can always count on consumer anger when there is a post-disaster rise in prices for things like plywood, fuel, bottled water, or potassium iodide tablets and personal radiation detectors. Retailers are vilified by people who don’t understand that those higher prices provide an incentive for entrepreneurs to rush needed supplies to the area. And as Mike Munger explains, these same people also fail to realize that if limited supplies of ice are sold for $8 a bag instead of $2, then people who need ice to preserve their prescriptions and baby formula are less likely to lose that ice to folks who just prefer their bottled water chilled.

I suppose it’s possible that some retailers are just greedy, but since higher post-disaster prices are beneficial, why should that make any difference? And why is it that politicians denounce higher prices as akin to looting, and promise to ‘name and shame‘ offenders?  Could it be they are no more economically savvy than the rest of us, or is it perhaps more likely vendors aren’t the only ones willing to exploit a disaster for their own benefit?

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