A Government Disaster

Antony — November 9, 2012

Hurricane Sandy has brought hardship to millions of people, and in its aftermath, many are arguing that large-scale disasters such as this illustrate the need for government intervention. But other than strutting around in front of cameras, what have government officials actually done? One of the most visible measures taken has been to combat “price gouging”, to protect the poor consumers from evil gasoline profiteers.

Like all interventions, however, the price controls have had unintended consequences. They have caused long lines and shortages. It seems that many people fail to realize the basic economic reality that price controls will always cause shortages. Economist Bob Murphy does a good job of describing the various ways in which the “anti gouging” laws are harmful:

In fact, the lesson of Hurricane Sandy should be the exact opposite of the pro-government position. Times of hardship and distress are exactly the times when free markets are most needed, and government intervention is most harmful. It is during these times when we most need the creativity of the free market to enable people to work together effectively, and when we can least afford the destructive impacts of government interventions.

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