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Price Gouging In The Wake Of A Crisis–Sandy’s Impact On New York And New Jersey

November 4, 2012

It’s impossible for those outside the area to really understand the scope of the damage caused by Sandy to the New York/New Jersey area.  It’s heartbreaking to read about those who seem to have lost everything and have nowhere to go.  According to an article in yesterday’s LA Times over 2.5 million customers remained without power at the time of their report and yet they might be considered the lucky ones when compared to those who lost their homes.  Although, according to this report formal aid had just begun to trickle in to Staten Island, until that time it was neighbor helping neighbor in a concerted effort to just stay alive.  Unfortunately, those in Queens reported a less stable situation as many armed themselves with whatever was available to protect themselves from those who would do them harm.

Governor Cuomo of New York announced that the Defense Department would be making gas available using mobile gas stations, while asking that first responders be given first priority.  In New Jersey, Governor Christie signed an executive order requiring gas stations in 12 New Jersey counties to implement an odd/even system of gas rationing beginning Saturday and continuing until further notice.  The Governor also made it clear that reports of price gouging would be investigated. According to the LA Times:

The governor announced Friday that the state’s Division of Consumer Affairs and attorney general have subpoenaed 65 businesses, including gas stations, accusing them of price-gouging desperate consumers.

Now some may suggest that this is not the time to address the subject of price gouging, but I believe otherwise.  It is not a question of being unsympathetic to the plight of those affected, but what better way to allocate resources?  For example, had the few remaining gas stations been allowed to raise their prices to reflect the difference in supply and demand, might that have reduced the demand and possibly ensured that gas was available for first responders?  In that same way,  might not have price increases on various other items reduced the ability for those first in line to empty the shelves of other necessities?   This is not to suggest that the less well off should be left to freeze or go hungry.  After all, any supplies being distributed by the various relief entities were rationed and provided free on a first come/first serve basis.

Let’s take a look at how “price gouging” might have been beneficial.  Entrepreneurs outside the immediate area might well have been motivated to bring supplies to those in need in the hope of making a profit.  The more entrepreneurs who responded to this need, the faster the delivery and as a result there would have been more goods at lower prices in a very short time.  On the other hand, the higher prices might have motivated those with transportation to widen their search for both fuel and other necessary supplies.

Just a thought on “price gouging”.


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